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The pinnacle of one of many world’s largest fertiliser firms has warned that heightened tensions within the Center East might set off a recent meals value shock by straining world provide chains for crop vitamins and vitality.
Svein Tore Holsether, chief government of Norwegian group Yara, mentioned fertiliser teams and prospects had been “monitoring intently” the dangers across the Strait of Hormuz, by way of which 40 per cent of the world’s urea and 20 per cent of worldwide LNG flows, warning that any disruption might ripple by way of world meals manufacturing.
Fertiliser markets have “been extraordinarily risky within the final two weeks, and it exhibits how related every part is”, he instructed the Monetary Instances.
Holsether pointed to the recent shutdown of Israeli gasfields, which disrupted fertiliser manufacturing in Egypt, as an indication of how rapidly regional tensions can ripple by way of provide chains.
Tensions between Iran and Israel escalated sharply this month pushing up Brent crude above $80 per barrel earlier than falling again to the excessive $60s after a ceasefire was brokered earlier this week.
Trade analysts have warned that greater than a fifth of the world’s urea output had stopped resulting from battle and provide disruptions. “Iran has shut all ammonia vegetation for safety causes, whereas Egypt stays offline resulting from halted Israeli gasoline flows,” mentioned Sylvia Traganida, senior ammonia editor at consultancy ICIS.
Consultancy CRU warned Israel’s strikes on Iran and the retaliatory assaults “fed into main disruption to nitrogen markets” inside a number of days of the occasions and posed “ongoing threats to phosphate, potash and sulphur provide from the area”.
Virtually a 3rd of urea exports, 44 per cent of sulphur exports and almost a fifth of ammonia exports transfer by way of or are produced in international locations west of the Strait of Hormuz, in response to knowledge from CRU.
“The meals system is fragile,” mentioned Holsether. “If [energy prices] keep excessive over time, that will even spill into the meals system, prefer it did in 2021 and into 2022 as nicely with the outbreak of the conflict [in Ukraine].”
The final main disruption to fertiliser markets got here in 2022, when Russia’s full-scale invasion of Ukraine despatched pure gasoline costs hovering and triggered a pointy rise in fertiliser prices, contributing to a world meals value disaster.
Since then, crop nutrient costs had eased because the pure gasoline market had declined, however Europe’s fertiliser business remained beneath stress as Russian imports took an even bigger share of the market, Holsether mentioned, as he returned from his first go to to Ukraine since Russia’s full-scale invasion in February 2022.
Whereas sanctions have curbed exports of Russian pure gasoline, a crucial enter in nitrogen fertiliser, meals and crop vitamins have remained exempt, permitting Moscow to redirect its gasoline by way of fertiliser manufacturing.
Holesther welcomed the EU’s latest transfer to impose tariffs on Russian fertiliser however known as it overdue. He mentioned Europe wanted to keep away from “repeating errors” made in vitality imports with meals.
The Yara chief accused Moscow of weaponising meals and fertiliser, each by increasing fertiliser exports to extend world dependency on its provide and by focusing on Ukraine’s civilian agriculture in a marketing campaign to destroy the nation’s position as one of many world’s agricultural powerhouses.
“There’s the army combat, however there’s additionally a combat the place meals is getting used as a weapon,” Holsether mentioned, including that greater than 20 per cent of Ukraine’s farmland was now mined, occupied or unusable.
Earlier than the conflict, Ukraine’s meals exports, which included as much as 50mn tonnes of cereals, fed about 400mn folks a 12 months.
The nation’s grain and oilseed manufacturing fell from 78mn tonnes in 2023 to 72.9mn tonnes this 12 months, Holsether mentioned, reflecting the mounting affect of conflict on the nation’s agricultural output.
