The Strait of Hormuz is once again the focus of attention in the fertilizer market

The price of nitrogen depends on the openness of the Strait of Hormuz

Fertilizer costs are once again under pressure, with tensions surrounding the Strait of Hormuz being the main source of uncertainty. The importance of this route stems from the high concentration of key raw materials transported through it: approximately 34% of global urea trade, 23% of ammonia, and 20% of LNG pass through it, and LNG prices influence the production costs of nitrogen fertilizers. As a result, problems on a single shipping route can simultaneously impact the energy market, fertilizer production, and feed production costs.

The relationship is direct, as natural gas accounts for 60–80% of the production costs of nitrogen fertilizers. Any disruption to supplies or increase in gas prices therefore quickly affects fertilizer prices. Europe remains particularly vulnerable, as production costs there were already higher than in other regions. Further increases in gas prices could reduce the profitability of some local plants and increase dependence on imports. For livestock producers, this means sustained cost pressure, as nitrogen fertilizers are critical for grass yields and silage production.

Price remains a persistent problem

Current logistical problems are not the only factor behind the price increases. After a major disruption, supplies may return to normal within a few months, but prices may remain high for much longer. In practice, therefore, the more persistent problem is not the availability of fertilizers itself, but their cost. In countries where support for farmers is limited, producers may reduce their nitrogen use. This could lead to lower yields and poorer-quality forage, as well as increase the need to purchase additional feed.

The scale of this phenomenon will depend on the duration of the disruptions. If the crisis is short-lived, global nitrogen use could fall by 1–2%, and if tensions persist for a year, it could drop by as much as 4%. At the same time, rising transportation and raw material costs may affect the prices of other fertilizers, even if they are not directly dependent on the situation in the Gulf. In the coming months, gas prices, freight rates, and the profitability of nitrogen fertilizer production will be key factors.