How the Blocking of the Strait of Hormuz Will Affect Fertilizer Prices for Ukraine
This is reported by AgroReview
The closure of the Strait of Hormuz could significantly impact the global fertilizer market, provoking price increases for Ukrainian farmers. This opinion was expressed by Leonid Shnaidman, managing partner of the company “Agropartner.”
Impact of Logistics Constraints on the Fertilizer Market
According to the expert, any disruptions in the logistics of the Strait of Hormuz primarily affect oil and ammonia, which is a key raw material for the production of nitrogen fertilizers. An increase in oil prices is immediately reflected in freight rates, which directly affects fertilizer prices for importers.
“If there are logistical constraints or risks in the Strait of Hormuz, it immediately creates tension in the global market. The rise in oil prices will be reflected in freight rates, which has a specific impact on the increase in fertilizer costs,” explained Shnaidman.
Ammonia, according to Shnaidman, is a contracted commodity that is usually booked in advance. In conditions of uncertainty, importers either postpone purchases or are forced to buy at higher prices, especially if the price is fixed according to market indicators.
Price Dynamics and Market Reaction
The market has already begun to react to the tense situation: the supply of urea has decreased, and its price has risen by approximately $10 per ton — to $505/ton FOB for March deliveries, whereas it was previously $495/ton. Last week, as noted by Shnaidman, it was very difficult to purchase urea. Some suppliers withheld volumes in anticipation of further developments, and with market instability, the price could rise by another $20–30 per ton in just a few days.
Even those producers who are not dependent on logistics in the Persian Gulf may raise prices due to increased demand and uncertainty. New contracts at higher prices set a market benchmark, leading to the increase in other contracts, even without an actual shortage of products.
As a result, additional costs are passed on to end consumers — Ukrainian farmers. Some farmers may temporarily halt purchases to monitor further trends in the market, while others, on the contrary, will fix prices now to avoid even greater increases in costs.
“I expect there may be a week or two of relative calm. At the same time, for some farmers, a $30 increase per ton will not be critical, so they will continue to make purchases,” concluded Shnaidman.