Gulf conflict: LNG crunch could hit urea output ahead of Sharif season

NEW DELHI: India may face severe disruptions in the supply of fertilizers and raw materials next autumn (starting June) if the blockade of the Strait of Hormuz due to the conflict in West Asia continues, industry insiders said. They added that since it was the off-season, there was no immediate crisis.Any reduction in liquefied natural gas (LNG) supplies from urea maker in the coming weeks could affect the production of key soil nutrients ahead of the Herif planting season, a fertilizer company executive said, adding that they were closely monitoring developments. The kharif crop accounts for more than half of India’s food production as major crops such as rice, pulses, oilseeds, cotton and sugarcane are sown during this season.

Fertilizer companies produce an average of about 2.5 million tonnes (MT) of soil nutrients per month. Industry observers said if LNG supply is irregular, production could be severely affected, stressing that fertilizer production and stockpiling usually start in March to ensure smooth distribution.Currently, 60% of the LNG used in urea production is imported from Qatar, which has a long-term agreement with India. Currently, 30 of the 32 urea production units use natural gas as feedstock.Industry observers also said that in addition to supply issues, the blockade of major shipping routes in the Gulf will push up the prices of diammonium phosphate and urea, which will directly affect the government’s food subsidy expenditures.Regarding the current inventory level, industry insiders said that as of the end of February, urea inventory was 5.5 tons, compared with 4.9 tons in the same period last year. The company’s current DAP inventory is expected to be approximately 2.5 tons, compared with 1.3 tons in the same period last year. In terms of compound fertilizers, NPK (nitrogen, phosphorus and potassium) stocks were higher at 5.4 tonnes compared with 3.2 tonnes a year ago. The increase in inventories is due to surge in imports during the current financial year.