Middle East tensions may disrupt fertiliser supply chain, but industry says stocks adequate for now
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India imports about 30% of its fertiliser requirement, with the Middle East supplying nearly 40% of it, rating agency CRISIL said in its report on March 5.
- Middle East tensions may disrupt fertilizer supply, raise prices.
- Indian companies have sufficient fertiliser stocks for months.
- Extended disruption may affect LNG and key raw material imports.
Escalating tension in the Middle East could disrupt fertiliser supply chains and push up global prices. However, the industry says it currently has sufficient inventories to cushion any immediate impact.
Companies have enough stocks to meet demand for the next couple of months, partly due to carryover inventory from the previous season, Rahul Mirchandani, president of the Indian Micro-Fertilizers Manufacturers Association, and chairman and managing director of Aries Agro Ltd, told Moneycontrol.
“For now, companies have enough stocks for the next couple of months because the last season was not great and there are leftover inventories. So the early kharif season will not see an immediate shock,” Mirchandani said.
However, prolonged disruption in the region could tighten supplies of key inputs and push up prices globally, analysts warned.
India imports about 30 percent of its fertiliser requirement, with the Middle East supplying nearly 40 percent of those imports, rating agency CRISIL said in its report on March 5. The country also depends on the region for around 30 percent of imports of key raw materials and intermediates, including rock phosphate, phosphoric acid and muriate of potash.
“Since the region also plays a key role in the global supply chain, there is a likelihood of an increase in international prices for urea and di-ammonium phosphate,” CRISIL said, adding that supply-chain disruptions could affect imports into India.
Natural gas availability
Natural gas availability is another key concern. Liquefied natural gas (LNG) is a critical feedstock used in manufacturing urea, and any reduction in supply or spike in prices would raise production costs.
The risk has intensified after QatarEnergy LNG suspended all production and declared force majeure on exports following military attacks on its facilities. The company, formerly known as Qatargas, is the world’s largest producer of liquefied natural gas.
India depends heavily on LNG imports from QatarEnergy, with supplies from Qatar accounting for nearly 50 percent of its LNG requirements, making fertiliser production particularly vulnerable to disruptions.
Brokerage Emkay Global Financial Services said in a March 5 note that the conflict-driven supply shock has already pushed up prices across petrochemical and fertiliser value chains.
Double blow
According to the brokerage, the fertiliser industry faces a double blow from tightening imports of ammonia, di-ammonium phosphate and urea from the Middle East, along with disruptions to LNG supplies. Lower gas availability could hit the production of ammonia, a key feedstock for fertilisers.
This could impact domestic producers such as Chambal Fertilisers and Chemicals, Deepak Fertilisers and Petrochemicals Corporation and Gujarat Narmada Valley Fertilizers and Chemicals.
Mirchandani said companies are already evaluating contingency measures to deal with potential supply disruptions.
“The industry is exploring alternative fuels like solar, diesel and coal, but systems cannot be changed overnight. Any such substitution will take place over 3-4 months,” he said.
Import substitution
Companies are also looking at import substitution to reduce dependence on overseas suppliers for certain raw materials, he added.
An industry source said gas-based fertiliser plants may be forced to curtail production if disruptions persist, although most companies maintain 20–40 days of gas inventory and import supplies under long-term agreements with foreign partners.
To mitigate supply risks, companies are also exploring alternative sourcing routes, including imports from regions such as South Africa.
However, such diversions could raise freight costs and extend delivery timelines.
“We are waiting to assess the impact on freight, which should become clearer in the next 2-3 days. We are already in the process of renegotiating contracts, but freight operators will be able to guide on the net impact by Friday,” Mirchandani said.
Prakash Biyani, vice president at Elara Securities, said a prolonged gas disruption could force India to increase fertiliser imports, which may, in turn, push global prices higher.
“If gas supply remains curtailed, the government will have to import more urea for the domestic industry. If the global market knows India will be importing more, prices will go up,” Biyani said, adding that supplies remain normal for now.
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