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Iran Closes Strait of Hormuz
Iran's blockade of the Strait of Hormuz, amid ongoing conflict, has led to shortages in global fertilizer supplies, prompting German producers to increase output. Energy price surges are offsetting gains for companies like SKW, while farmers face higher costs without passing them on. The crisis threatens food security in vulnerable regions, according to the World Trade Organization.
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Iran's closure of the Strait of Hormuz has disrupted a third of the world's fertilizer supplies, forcing German producers to ramp up operations amid soaring energy costs. The blockade, stemming from the conflict that began on February 28, has triggered warnings from the World Trade Organization about threats to global food security, particularly in Africa and South Asia.
German fertilizer makers, including SKW, are operating at full capacity to address the shortfall, but face challenges from doubled gas prices. At the SKW plant near Wittenberg, production of urea and ammonia has intensified to meet European demand. The site, with its 220-hectare facility and internal rail network, expects revenue growth of 10 to 20 percent this year, though market volatility makes estimates uncertain.
However, rising energy expenses, which account for 80 percent of production power, may result in only breaking even.
SKW imports natural gas from Norway, the Netherlands, and the United States, but global market pressures from the conflict have driven up prices. The company had already posted losses for three years due to the earlier energy crisis from the Ukraine war, highlighting Germany's past reliance on Russian supplies.
Now, the Iran conflict creates a domino effect, exacerbating costs across the industry. >"We can pass on the higher costs to the consumers of our products. com) The German Fertiliser Producers' Association stated that several European plants have closed in recent years due to high costs, even before the current crisis.
It warned that without local production and competitive farming, Europe's food security is at risk. The association highlighted dependence on international markets as a vulnerability.
Farmers in Germany are absorbing sharp increases in fertilizer prices, which have risen 50 percent since the war began. Cereal prices on the world market have remained stable, preventing cost pass-through. Some farmers are stocking up now to avoid potential shortages next year if the conflict persists.
