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Fertilizer prices keep climbing — but not every producer stands to gain
The Eneos Arrow oil tanker arrives at an open-sea berth of the Shirashima National Petroleum Stockpiling Base in Kitakyushu, Fukuoka Prefecture, Japan.
Global fertilizer prices are surging amid supply disruptions linked to the Persian Gulf region, yet the extent to which producers benefit varies sharply depending on product type and input cost structure.
A divergence between nitrogen and phosphate
Fertilizers fall into two main categories: nitrogen-based fertilizers, most notably urea — produced from natural gas — and phosphate-based fertilizers, which are derived from sulfur, a byproduct of oil refining.
Geopolitical tensions in the Middle East, particularly the closure of the Strait of Hormuz, have affected both categories in contrasting ways. Roughly one-third of globally traded fertilizer volumes pass through Hormuz. Qatar — which accounts for approximately 20% of global LNG supply — has suspended operations at its Ras Laffan facility, disrupting the entire urea production chain that depends on that gas.
According to analysts at CreditSights, North American nitrogen producers — CF Industries in particular — are direct beneficiaries as import demand from India and South Asia shifts toward the region following the tightening of Gulf supplies. Phosphate producers such as Nutrien, by contrast, face mounting cost pressure as sulfur — a key input — also faces supply disruptions, squeezing margins even as finished product prices rise.
Expert view
"Nitrogen was structurally tight before the conflict amplified everything. The divergence within the fertilizer sector is something many investors have yet to price in — it is precisely the detail that broad fertilizer narratives tend to miss." — Andrew Brady & Jarah Cotton, CreditSights
Demand risk — a factor yet to be fully priced in
Beyond supply-side risks, analysts have flagged a potential erosion in demand. Rising nitrogen costs are causing spring purchasing decisions to be delayed, putting pressure on crop science companies' sales volumes. This introduces a ceiling on the nitrogen bull case that the supply-tightening narrative alone does not fully capture.
Oil prices hit historic highs as equities hold relatively steady
Alongside the fertilizer market, the Dated Brent crude benchmark has just recorded its highest level in history — a development that underscores how acutely energy markets are reacting to the geopolitical tensions gripping the Middle East.
Equity markets, however, have proved surprisingly resilient. The S&P 500 is down less than 4% despite surging oil prices and diminishing expectations of interest rate cuts — a reaction markedly different from past energy crises. Analysts suggest that when extreme risk scenarios become too difficult to quantify, markets tend to hold rather than respond sharply.
Source:Bloomberg
