Hormuz Fertilizer Supply Chain Disruption: A Cascading Shock to Global Shipping and Agricultural Economics

Source: Pangaea Logistics / Splash247

Eight weeks of conflict in the Middle East have engineered a fertilizer crisis threatening to reshape the global agricultural economic landscape, from Brazil to Southeast Asia. Currently, around 24% of the world's bulk fertilizer supply is trapped behind the Strait of Hormuz.

While oil supplies have dominated headlines since the conflict erupted, the fertilizer market is emerging as an equally heavy casualty—and the full extent of the damage may only become glaringly apparent when year-end harvests fall short of expectations.

Alarming Data from Maritime Organizations

Leading maritime analytics organizations have released figures demonstrating the severity of the supply chain squeeze:

●    UNCTAD (United Nations Conference on Trade and Development): Transit volume through the Strait of Hormuz has plummeted by over 95% since the fighting began, with approximately 3,200 vessels initially trapped in the region.

●    SSY (Simpson Spence Young): A domino effect has locked down roughly 24% of the global bulk fertilizer supply.

●    AXSMarine: Estimates the volume of fertilizer stuck in the Gulf at approximately 833,800 tonnes, the vast majority of which is urea—the world's most commonly used nitrogen fertilizer.

●    Jefferies: The investment bank estimates that the drop in nitrogen fertilizer exports from the Gulf alone accounts for about 30% of the global urea supply.

The Dual Pressure of Production and Transport Costs

Exacerbating this physical bottleneck is a production cost crisis. Natural gas accounts for up to 80% of urea production costs, and surging gas prices are rendering output from alternative locations economically unviable. Phosphate and potash supply chains are also facing additional disruptions due to logistical snarls in areas adjacent to the conflict zone.

According to shipbroker BRS, nitrogen fertilizer prices soared by nearly 40% in March, while Jefferies reports a 23% across-the-board increase for all fertilizer commodities.

The laws of agricultural economics are unforgiving. When crop revenues cannot offset fertilizer costs, farmers are forced to reduce application rates, accept lower yields, or pivot to crops that require fewer inputs. SSY has warned of the possibility of US farmers switching to soybeans, where fertilizer costs per acre are roughly one-third of those for corn. This crop rotation is a survival strategy, but its repercussions will bleed into next year's crop supply.

Spot Freight Rates and Critical Risks in Decision Making

Filipe Gonzaga, Managing Director of the Swiss trading firm Bryce, notes that the physical cargo hasn't disappeared—but the economics of transporting it have become almost insurmountable.

"There’s always a way, but this way may cost too much. This translates directly into higher input costs just as we move into critical agricultural planting windows globally," Gonzaga observed.

He pointed out that the core issue isn't merely vessel delays, but the severe spike in war risk insurance and spot freight rates, in a context where the Persian Gulf serves as a foundational node for global nitrogen exports. Gulf producers are struggling to clear spot cargoes, forcing buyers to aggressively source from alternative hubs, including the Black Sea and North Africa.

Price volatility is amplifying across the entire chain. Cost and Freight (C&F) prices at destination markets—particularly in South America and Asia—are decoupling from origin values due to escalating freight costs. Origin and destination prices can now fluctuate wildly from day to day.

"If this bottleneck persists, it goes beyond squeezing trader margins; it fundamentally shifts agricultural production economics and feeds straight into macro food inflation, as farmers will need the inputs and will pay higher prices," Gonzaga warned.

Long-Term Risks to the Dry Bulk Market Structure

Mark Williams, Managing Director of the consultancy Shipping Strategy, predicts the fertilizer disruption could snowball into a massive issue for agricultural cargo flows in the second half of the year. Brazil, alongside several regions in Asia and Africa, relies heavily on imported fertilizers, and the current timing is exceptionally detrimental. If supplies tighten during the planting season and application rates drop, crop yields will suffer—meaning fewer grain cargoes to transport in H2 2025.

The International Grains Council (IGC) believes that most Northern Hemisphere farmers have secured sufficient supplies for the current spring fieldwork, but warns a prolonged crisis could alter planting decisions elsewhere later in the year.

According to Williams, while the conflict might still offer some short-term support for the dry bulk sector through supply disruptions, slow steaming, and cargo diversions, the medium-term risk is demand destruction. This fallout is driven by inflation, energy scarcity, fertilizer chain breakdowns, and weakening industrial activity—a combined threat to the ocean freight market that is only now beginning to be priced in.

This escalating fertilizer shipping crisis will be discussed in detail next week during the Agri-Commodities session at Geneva Dry, the world's premier commercial freight conference.

See more:

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Source: Phaata.com (According to Splash247)

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