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The head of one of the world’s largest fertiliser companies has warned that heightened tensions in the Middle East could trigger a fresh food price shock by straining global supply chains for crop nutrients and energy.
Svein Tore Holsether, chief executive of Norwegian group Yara, said fertiliser groups and customers were “monitoring closely” the risks around the Strait of Hormuz, through which 40 per cent of the world’s urea and 20 per cent of global LNG flows, warning that any disruption could ripple through global food production.
Fertiliser markets have “been extremely volatile in the last two weeks, and it shows how connected everything is”, he told the Financial Times.
Holsether pointed to the recent shutdown of Israeli gasfields, which disrupted fertiliser production in Egypt, as a sign of how quickly regional tensions can ripple through supply chains.
Tensions between Iran and Israel escalated sharply this month pushing up Brent crude above $80 per barrel before falling back to the high $60s after a ceasefire was brokered earlier this week.
Industry analysts have warned that more than a fifth of the world’s urea output had stopped due to conflict and supply disruptions. “Iran has shut all ammonia plants for security reasons, while Egypt remains offline due to halted Israeli gas flows,” said Sylvia Traganida, senior ammonia editor at consultancy ICIS.
Consultancy CRU warned Israel’s strikes on Iran and the retaliatory attacks “fed into major disruption to nitrogen markets” within a few days of the events and posed “ongoing threats to phosphate, potash and sulphur supply from the region”.
Almost a third of urea exports, 44 per cent of sulphur exports and nearly a fifth of ammonia exports move through or are produced in countries west of the Strait of Hormuz, according to data from CRU.
“The food system is fragile,” said Holsether. “If [energy prices] stay high over time, that will also spill into the food system, like it did in 2021 and into 2022 as well with the outbreak of the war [in Ukraine].”
The last major disruption to fertiliser markets came in 2022, when Russia’s full-scale invasion of Ukraine sent natural gas prices soaring and triggered a sharp rise in fertiliser costs, contributing to a global food price crisis.
Since then, crop nutrient prices had eased as the natural gas market had declined, but Europe’s fertiliser industry remained under pressure as Russian imports took a bigger share of the market, Holsether said, as he returned from his first visit to Ukraine since Russia’s full-scale invasion in February 2022.
While sanctions have curbed exports of Russian natural gas, a critical input in nitrogen fertiliser, food and crop nutrients have remained exempt, allowing Moscow to redirect its gas through fertiliser production.
Holesther welcomed the EU’s recent move to impose tariffs on Russian fertiliser but called it overdue. He said Europe needed to avoid “repeating mistakes” made in energy imports with food.
The Yara chief accused Moscow of weaponising food and fertiliser, both by expanding fertiliser exports to increase global dependency on its supply and by targeting Ukraine’s civilian agriculture in a campaign to destroy the country’s role as one of the world’s agricultural powerhouses.
“There’s the military fight, but there’s also a fight where food is being used as a weapon,” Holsether said, adding that more than 20 per cent of Ukraine’s farmland was now mined, occupied or unusable.
Before the war, Ukraine’s food exports, which included up to 50mn tonnes of cereals, fed about 400mn people a year.
The country’s grain and oilseed production fell from 78mn tonnes in 2023 to 72.9mn tonnes this year, Holsether said, reflecting the mounting impact of war on the country’s agricultural output.