Indian Urea Producers Halt Operations Amid LNG Supply Disruptions Linked to Iran Conflict

Urea Production Disrupted in India due to LNG Shortage

Indian Farmers Fertiliser Cooperative Ltd. (IFFCO), the top producer of urea in India, has halted or initiated maintenance at some of its facilities due to the suspension of liquefied natural gas (LNG) supplies from Qatar. The primary feedstock for urea production, LNG serves as both an energy source and a key input in making the world's most widely used fertilizer.

Key Statistics:

• LNG supplies to India's fertilizer industry currently meet about 70% of their requirement.
• Restarting a paused plant could take up to 30 days, provided LNG supplies resume.
• Stockpiles of fertilizer, including urea, stood at 18 million tons as of March 10, up 37% from the same period last year.
• India's fertilizer production and imports rose to 65 million tons in the 10 months ended January 31, up from 57 million tons a year earlier.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The disruption in LNG supplies could force India, the world's top importer of urea, to increase purchases, leading to higher global prices and hampering the government's efforts to reduce its subsidy burden. The government has taken measures to ensure that at least 70% of the average LNG needs of fertilizer makers are met while the Middle East conflict snarls supply.

Market Implications:

• Higher farm input costs in India could have implications for crop prices and broader inflation, given the country's status as the world's biggest grower and exporter of rice and the No. 2 producer of wheat, cotton, and sugar.
• Thailand, Bangladesh, India, and Vietnam are dipping into the spot market to secure near-term LNG supplies, but some tenders have gone unawarded, indicating a shortage of immediately available fuel.

The Fertiliser Association of India stated that the industry is working with the government to prioritize allocations for urea output and ensure that supplies meet farmers' demand.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline