Fertiglobe Reports Fertilizer Prices Rose Sharply as Gulf Exports Shift to Overland Routes

Fertilizer prices surged by as much as 80% to more than $900 a ton after the war disrupted Gulf exports, Ahmed El-Hoshy, CEO of Fertiglobe, said. About one-third of global urea supplies and one-fifth of ammonia supplies move through the Strait of Hormuz.

Fertiglobe, based in Abu Dhabi and one of the world’s largest exporters of urea and ammonia, exports fertilizer from facilities in Algeria, Egypt, and the UAE.

The company is listed in Abu Dhabi and majority-owned by ADNOC. It has continued producing fertilizer in the UAE during the conflict, though it experienced short outages of between five and 10 days at its two production lines. Fertiglobe has resorted to trucking its output to ports beyond the Strait of Hormuz.

A single ship can move 50,000 tons of product compared with 25 tons per truck, El-Hoshy said. “The market is telling us to get it out this way,” El-Hoshy said. Higher transport costs are being recouped thanks to the spike in prices, he added.

Many farmers are trying to delay purchases until the last possible moment in the hope that Gulf supplies will be restored, El-Hoshy said. Many American farmers rely on fertilizer moving by barge up the Mississippi River ahead of the planting season, limiting their ability to defer purchases. Fertilizer prices are now far higher while crop prices have risen only modestly so far, El-Hoshy said.

“We could see less [use of fertilizers]. We could see what we call demand destruction,” he said. Nitrogen fertilizers are responsible for feeding roughly half the world’s population by boosting crop yields, El-Hoshy said.

High urea prices are squeezing farmers and raising the possibility of lower crop yields later this year. Fertiglobe’s revenue rose 32% to $915 million in the first quarter. Much of Fertiglobe’s Q1 sales weren’t booked at the higher prices, El-Hoshy said.

Semafor reported that if shipping through Hormuz resumes, prices could ease but uncertainty over security in the waterway will be a persistent concern. ” Trucks are taking over from ships as Gulf countries adjust. Saudi miner Maaden now has 3,500 trucks moving phosphate to the Red Sea.

Traffic at a UAE port on the Gulf of Oman is 70-times the prewar level. Supermarket chain Spinneys drove snacks and baby food overland from the UK to the UAE.