Access, not cost, will define fertilizer markets after Hormuz

A change in paradigm

For most of the past decade, a fertilizer buyer with capital could secure fertilizer product. Price did the rationing: supply responded, trade flows adjusted, and availability was rarely the binding question for those willing to pay.

The effective closure of the Strait of Hormuz, following the military escalation of late February 2026 and the withdrawal of war-risk cover that brought Gulf tanker traffic close to a standstill by early March, is breaking that assumption. And the demise of that assumption may outlast the crisis that caused it.

Hormuz is the third supply shock in four years, after the 2022 invasion of Ukraine and China’s progressive tightening of its export quotas. Each exposed the same dependency, but none corrected it.

A market that absorbs three structural shocks in four years and emerges more concentrated, not less, is no longer experiencing isolated disruptions. It is revealing its operating logic. When supply is constrained by logistics and missing feedstocks rather than by price, a higher bid no longer draws out volume.

The market stops clearing through cost and begins clearing through access: who holds the contract, who controls the route, and who reaches available supply first. When the Strait of Hormuz reopens, one behaviour it has reinforced is likely to persist: treating fertilizer as something to be secured, rather than simply purchased.

Exposure across nutrients

Exposure is not uniform across nutrients, and phosphate-based fertilizers carry that exposure the most, for reasons that have little to do with the nature of phosphate itself.

Phosphate processing depends on sulfuric acid, and therefore on sulfur, and the Gulf supplies roughly 44% of globally traded sulfur.

That dependency is made worse by the nature of the feedstock. Sulfur is not mined to demand; it is recovered as a by-product of oil and gas processing, so its availability is set by refinery run rates and energy-market conditions that have nothing to do with fertilizer demand.

A producer willing to pay any price for sulfur still cannot summon more of it into existence, because no one refines crude in order to make sulfur. This is the sharpest illustration of a market that has stopped clearing on price: the binding input sits beyond the reach of the price signal entirely.

Signs of sulfur dependence already appearing

The consequence is already visible. OCP, which controls a significant portion of global phosphate rock reserves and operates from Atlantic ports that should insulate it from a Gulf chokepoint, faces the same sulfur constraint as its Persian Gulf competitors.

Geographic advantage is neutralised by feedstock dependency. A producer can hold its own rock and its own export berth and still be unable to run at normal rates if the sulphur to process it does not arrive.

Nitrogen registers the shock faster, if less structurally: Gulf producers account for more than 40% of seaborne urea trade, so cargoes withdrawn through Hormuz come straight out of the market.

Potash is the exception, with supply centred in Canada, Russia and Belarus, and has been the stable nutrient by comparison.

But stability in one nutrient offers only partial relief, as crop nutrition requires balance and substitution between nutrients is limited.

Evidence of disconnect between feedstock and finished prices

The clearest evidence that the regime is shifting lies in the disconnect between feedstock and finished prices. Sulfur and ammonia costs have climbed, yet finished phosphate prices have not tracked them fully. Qatar’s sulfur contract has risen to US$805/t FOB, while Tampa ammonia has eased to aUS$775/t CFR. And yet, diammonium phosphate (DAP) prices in India were assessed at US$930 - 935/t CFR, and monoammonium prices (MAP) in Brazil at US$900/t CFR.

Part of that reflects genuine demand weakness; much of it is structural, as subsidy regimes limit how much of a feedstock increase can be passed through.

A market clearing on price would close that gap. This one is not, because price is no longer sufficient to clear it.

Allocation takes over. Volume moves through long-term contracts, government procurement, and established access to viable routes. The buyer’s question is no longer what the material costs, but whether any can be secured at all.

 

China’s shifting export stance - governments respond

Nowhere is that clearer than in China’s reversal. When the Ukraine war disrupted Russian flows in 2022, Chinese phosphate exports rose to fill the gap, and Brazil in particular avoided a serious shortage. This time, Beijing has moved the other way, restricting MAP exports through at least August 2026 to protect domestic supply.

The supplier that once acted as the market’s shock absorber has become a net withholder, and two uncorrelated access shocks - Hormuz and China - are now stacking at once.

Governments are responding in kind. Brazil, reliant on imports for around 85% of its fertilizer, has long held a National Fertilizer Plan (PNF) targeting a reduction in Brazil’s dependence on fertilizer imports.

In April, Petrobras approved a US$1 billion revival of the idled UFN-III plant at Três Lagoas. Petrobras is also pursuing plans to supply more than a third of the country's nitrogen fertilizer needs by 2028.

The EU has unveiled its EU Fertilizer Action Plan, aiming to support farmer affordability with longer-term signals on market transparency and strategic autonomy. In the US, legislation was introduced in the Senate that would eliminate tariffs and countervailing duties (CVDs) on phosphate fertilizer imports from Morocco.

The logic recurs wherever it appears: fertilizer is being treated less as a traded commodity than a strategic resource.

However, every tonne a country ring fences, and every tonne an exporter like China withholds, is a tonne removed from the open market. What begins as a defensive response to strain risks deepening it.

Food security implications around the world

It is likely that food security implications do not take the form of a single visible shortage. Instead, they are likely to emerge unevenly.

Nitrogen constraints feed through within the season; phosphate works more slowly but cuts deeper, since under- application early in the crop cycle cannot be corrected later.

In a market governed by access, the effect concentrates at the margins: on countries with the least purchasing power and the weakest procurement systems.

Not an immediate shock, but a gradual erosion of food output and resilience.

Outlook – where does the fertilizer system go from here?

The fertilizer system is becoming at once less flexible and less global. There is no swing supplier to absorb the strain, little substitution for key feedstocks, and limited capacity to scale quickly – and national efforts to secure supply tighten it further worldwide.

None of this makes shortages inevitable. But it does mean that adjustment, when it comes, will arrive less through price and more through availability: through who can secure product and who cannot.

After Hormuz, the market has not simply tightened. It has become more selective, more strategic, and less willing to serve a buyer on the strength of capital alone. The world is unlikely to run out of food. But it could produce less of it where it is needed most.

Read the article online at: https://www.worldfertilizer.com/special-reports/11062026/access-not-cost-will-define-fertilizer-markets-after-hormuz/