As of today, 70% of the sulfur tons that were trapped behind the Strait of Hormuz due to its closure have now transited through and are in transit for the global market.
That was the good news shared by The Fertilizer Institute’s Corey Rosenbusch on AgriTalk. Fertilizer is once again flowing through the critical part of the global supply, which had been largely blocked for traffic since the end of February. Every year more than one-third of all fertilizer globally transits through the Strait of Hormuz.
“Half of the world’s sulfur that’s traded comes through the strait,” he says. “Because it’s the key raw material in phosphate production– Saudi phosphate, Moroccan phosphate, US phosphate–they had all started to curtail production because they couldn’t get sulfuric acid to make it.”
Rosenbusch says urea vessels are also starting to flow again, “moving in the right direction,” but he’s hesitant to give exact estimates on how delayed or damaged the global supply chain is beyond being “months to years” for full recovery.
With uncertain timeline for full recovery, the industry is watching for updates on any manufacturing or infrastructure damages in the production of fertilizer in the region that could have occurred during the conflict so far.
What Does This Mean For Prices?
Volumes moving doesn’t necessarily equate to supply level increases. Or immediate price relief.
“Most of those tons, including a lot of the urea tons, we believe are already committed tons, so it’s not going to necessarily add a lot of supply right now, but it is still good news to get those tons moving,” he says.
Emphasizing the complexity of global fertilizer markets, Rosenbusch points to the seasonal nature of pricing as well as government interventions adding to the dynamics.
“A big driver of them (markets) is the seasonality of application, and so once we got through the season, as we do every season, you start to see those markets shift, and that’s what did happen in the context of so those prices could come down to pre-conflict levels,” he says.
He says India is a global price-setter because of its government intervention, and that country was sourcing about half of its urea this spring via supplies through the Strait of Hormuz.
“What a farmer in Iowa is going to pay is what the government of India is willing to subsidize for their farmers, and so if they’re going to pay $900 a ton for urea because they just give it to their farmers as part of their social program then we’re subject to competing for those tons on a global marketplace,” he says.
Building Resilience: Why U.S. Production Matters Now
While the Strait of Hormuz is critical for global fertilizer trade flows, domestic production has been taking focus.
Regarding the Trump administration’s efforts to increase domestic production of key fertilizer productions, Rosenbusch says the industry appreciates the recognition of its value for the country. The recognition is being paired with realistic timelines and investment requirements to develop more production. The administration is focused on building resiliency in supply and lowering input costs for farmers.
“We met with four cabinet secretaries talking about how to bolster domestic production, and the question was asked, ‘Can we get these new plants online in 12 to 24 months?’ And the answer is, it could take five years to build a nitrogen plant, and $4 billion or $5 billion.”
Rosenbusch says it was recognized how the industry is complex, and TFI members want to have conversations about how to add to the industry but not overtake the industry.
“We don’t want to see our plants owned and operated by the federal government,” he says. “I’m not sure growers would appreciate the federal government owning and operating these plants. We’re a free enterprise economy, markets work, we have to let them work. I don’t think we want to be a socialist fertilizer industry.”
Could More International Sources Come To Market?
“In the middle of all this, China decided to reenter the market, so they made an announcement a few weeks ago that they were going to allow urea exports again. We had heard that their production had outpaced the previous year by about 20% yet they still kept their export bans in place,” he says. “China is the world’s largest producer of fertilizer. They have historically opened their exports when Brazil gets to planting season, but they went a little early this year, and I think that’s why you saw a lot of the urea market move as well.”
