A fifth of global ammonia trade disrupted by Hormuz crisis

More than a fifth of the global trade in ammonia, a critical component of fertiliser, has been “effectively removed” by disruption in the Strait of Hormuz, according to a market intelligence group.

With supplies from Saudi Arabia, Qatar, the UAE, Bahrain and Iran severely affected, CRU Group said Oman was the only meaningful regional exporter outside the contested waterway. 

Supplies from Salalah port have been briefly disrupted by attacks, but operations have resumed.

Ammonia is used mainly to make nitrogen fertiliser for crops and is typically produced from natural gas. It is also used in plastics, pharmaceuticals, household cleaning products and refrigeration.

AGBI‘s John Crowley spoke to Lea Ong, an ammonia research analyst at CRU Group, about what the conflict means for ammonia flows, project timelines and global supply.

AGBI: How has the conflict and disruption around the Strait of Hormuz changed the economics of Gulf ammonia exports?

Lea Ong: The conflict has effectively removed 21 percent of global ammonia trade that transits the Strait of Hormuz, with supply from Saudi Arabia, Qatar, UAE, Bahrain and Iran now severely disrupted.

On the shipping side, war-risk insurance premiums have surged.

Image supplied

Lea Ong, an ammonia research analyst at CRU Group

Given that ammonia is transported on a relatively small and specialised vessel fleet, transit through the Strait of Hormuz has been near-impossible for most ships.

The Middle East’s traditional price advantage for delivered goods has been significantly worn down.  

Oman is currently the only meaningful Middle Eastern exporter outside the strait. While an attack on Salalah port disrupted supplies briefly, operations have since resumed.

AGBI: What are you seeing on major Gulf hydrogen and blue ammonia projects?

Ong: Qatar Fertiliser Company’s Ammonia 7 project was initially targeting commissioning in the third quarter. However, given the scale of the strikes on Qatar’s liquefied natural gas infrastructure, Doha is likely to prioritise LNG exports over ammonia production capacity.  

We are now expecting the commissioning of Ammonia 7 to be delayed to 2027.

For the green ammonia project in Neom, Saudi Arabia, construction is believed to be more than 90 percent complete. Commercial production is expected to begin in 2027. No delays have been observed so far.

In South Pars, the attacks reportedly damaged 12 percent of Iran’s total gas production which would directly curtail Iranian ammonia and urea output.

AGBI: Are buyers and investors starting to diversify away from Gulf supply towards producers seen as lower risk, such as the US, Brazil or parts of Africa?

Ong: Diversification would be difficult for buyers east of Suez (East Asia and Southeast Asia) due to limited options.

However, buyers west of Suez have already been diversifying – importing more from the US – following the Red Sea crisis and Ukraine war.

The US Gulf Coast is also a near-term alternative as Gulf Coast Ammonia in Texas began ramping up its exports in January before going on a planned outage.

Brazil is not a significant ammonia exporter and cannot realistically substitute Middle East volumes in the near term. A North African producer like Algeria is geographically the closest major exporter and already a meaningful supplier. 

AGBI: Could North African supply and existing Mediterranean pipeline infrastructure substitute for lost Gulf volume – and on what timeframe?

Ong: Algerian production has been intermittent in recent years, limiting its reliability as a substitute. Algeria and Egypt can replace some Middle Eastern volumes for European buyers relatively quickly, but they cannot replace the Gulf’s scale of supply. From our understanding, the existing Mediterranean pipeline infrastructure is not built to transport ammonia.

Further reading:

• Hormuz crisis ‘threatens crops for developing world’
• Aluminium nears four-year peak after Iran attacks Gulf smelters
• US helium distributor calls force majeure after Qatar LNG attack