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Fertilizer Crisis Looms: LNG Snarls Halt Production
11 Mar
Summary
- Middle East conflict disrupts LNG supplies crucial for fertilizer.
- Asian fertilizer producers shut plants due to feedstock shortages.
- Government measures aim to meet 70% of fertilizer makers' LNG needs.
Disruptions in liquefied natural gas (LNG) supplies, stemming from Middle East conflict, are severely impacting fertilizer production in Asia. Urea producers in India and Bangladesh have been compelled to shut down plants or advance their annual maintenance schedules due to the scarcity of LNG, a vital feedstock.
Indian fertilizer makers, including the prominent Indian Farmers Fertiliser Cooperative Ltd., have paused some facilities. Restarting a halted plant could take up to a month, contingent on the resumption of LNG supplies. Currently, India's fertilizer industry is receiving approximately 70% of its required gas supply.
The government is actively intervening, aiming to secure at least 70% of the average LNG needs for fertilizer manufacturers. Despite these efforts, countries like India, Bangladesh, Thailand, and Vietnam are struggling to secure near-term LNG supplies from the spot market, with some tenders remaining unawarded.
This situation poses a significant risk to India, the world's largest urea importer, potentially forcing increased purchases and global price hikes. Higher fertilizer costs could escalate farm input expenses, impacting crop prices and inflation, particularly as India is a major global agricultural producer.
