Insight Focus
The conflict in the Middle East has created havoc, pushing urea higher. Phosphate prices are rising due to limited supply, with India and Brazil driving demand for DAP and MAP. Potash prices are stable, but Brazil may have hit an affordability ceiling. Ammonia prices are likely at their lowest, with potential for conflict-related supply limitations.
Iran-Egypt Conflict Halts Urea
All seven urea production units in Iran— the main exporters being Pardis, Lordegan, MIS, KPIC, and Shiraz —have been idled. Iran’s annual urea production capacity is said to be close to 9 million tonnes, with exports of 4.5 million tonnes annually, although sanctioned by the US. Major importers of Iranian products include Turkey and Brazil.
According to local sources, Iran’s urea/ammonia production facilities have remained halted since June 14, and all ammonia stored in tanks has now been flared for safety reasons. While no urea/ammonia production facilities are believed to have been directly struck, two natural gas plants that supply Iran’s domestic market were hit on June 14.
An Israeli drone reportedly struck the onshore section of the Fajr Jam gas refinery’s Phase 14 in Iran’s South Pars field, causing a large explosion and halting about 12 million cubic metres of gas production. Since then, urea producers have emptied their ammonia tanks to reduce the risk of further explosions.
Additionally, Egypt has idled all nitrogen facilities since Israeli gas supply was halted. All urea and ammonia production stopped on June 13 after Israel ceased pipeline exports of natural gas to Egypt.
According to local sources, production in Egypt is expected to remain shut down until gas imports from Israel resume, a scenario considered unlikely until hostilities between Iran and Israel cease or ease significantly. Egypt’s net urea output stands at 7.7 million tonnes per year (or 640,000 tonnes per month) and DAP+MAP production ranges from 300,000 to 350,000 tonnes annually (against a capacity of 450,000 tonnes.
Potential Hormuz Closure Rattles Market
The threat of Iran closing the Strait of Hormuz would severely restrict over 40% of global offshore urea trade with producers from Qatar, UAE, Bahrain, Saudi Arabia and Egypt all being prevented from shipping to export markets.
In 2024, the top 10 urea-exporting countries collectively shipped 32.7 million tonnes, representing approximately 60% of the 55 million tonne global offshore urea trade.
Shipping war risk insurance for the Middle East has increased, though not significantly yet. War risk premiums remain around USD 30,000–USD 40,000 for Handyside and Supramax carriers entering and exiting the region. A marginal increase in insurance has not notably affected freight costs so far. Vessel owners are expected to take all precautions to avoid being stranded should the Strait of Hormuz be closed or passage restricted.
Navigating these risks creates significant pricing volatility. In the US (NOLA), barge prices for granular urea rose from USD 350/short ton to USD 425/short ton before falling back to USD 390/short ton. In Algeria, prices surged from well below USD 400/tonne FOB to USD 500/tonne FOB in a matter of days.
Most recently, Sorfert of Algeria sold 10,000 tonnes of granular urea at USD 520/tonne FOB (Port of Arzew) for July shipment to a European market—an increase of USD 82/tonne in less than a week. This marks a USD 20/tonne rise from earlier July business at USD 500/tonne FOB.
In Brazil, August urea traded at USD 480/tonne CFR, up USD 12.50 from the last settlement. Brazil, a large importer of Iranian urea (1.33 million tonnes in 2024), faces potential supply disruptions during the upcoming buying season. Chinese granular urea is now at USD 420/tonne FOB—USD 50/tonne above the floor export price of USD 370/tonne for granular and USD 360/tonne for prilled urea.
India tendered for 1.5 million tonnes of urea, with the Level 1 West Coast price at USD 399/tonne CFR, offered by two companies for 229,000 tonnes. Other bidders have withheld offers amid soaring prices, yet the Indian government’s purchasing agency (NFL) has repeatedly extended bid deadlines, to no avail.
Prices on urea have shot up across the board with the latest FOB Middle East price at USD 450/tonne and Algeria at USD 520/tonne FOB. However, if the Strait of Hormuz closes, prices could reach levels not seen since COVID week 15 of 2022, when Algeria sold at USD 1,150/tonne FOB.
Adding to the volatility, Russia, the largest exporter of urea in 2024 (8.9 million tonnes), is at war with Ukraine and has targeted nitrate facilities there. Meanwhile, the EU has implemented escalating annual tariffs on Russian fertilizer imports. China has introduced a limited export program, capping volumes at 2 million tonnes through the end of September.
The outlook for urea prices is anyone’s guess. One thing is clear: if tensions in the Middle East escalate and it continues for an extended period, prices will continue to rise. Already, affordability is becoming an issue, with Australian farmers reportedly hesitant to purchase urea at current Middle East FOB levels of around USD 450/tonne.
Phosphate Prices Climb Despite Weak Demand
Sentiment on processed phosphate remains unchanged and prices continue to rise. Despite China becoming an active international supplier, all DAP offered in the Ethiopia tender originated from China. EABC closed its postponed tender for 170,000 tonnes DAP on June 16, receiving offers for a total of 330,000 tonnes. All bids were Chinese origin, with the lowest at approximately USD 721/tonne FOB.
The DAP tender sought offers in three lots on an FOB basis, with or without 30 days credit, for June and July shipments.
On June 18, Saudi Arabia’s Ma’aden reported the sale of 100,000 tonnes DAP to two Indian buyers at USD 775/tonne CFR (July loading). This follows prior Indian business at mid-USD 770s CFR. NFL’s 50,000 tonne DAP tender (closed June 13) was reportedly awarded to a trader at USD 781.50/tonne CFR, though this is unconfirmed by buyer or seller.
India’s spot DAP assessment remains unchanged at USD 757–764/tonne CFR. The assessment midpoint has climbed from USD 636/tonne in mid-March and USD 695/tonne in early May—now the highest since September 2022. The latest from India suggests DAP prices have crossed USD 800/tonne CFR for July shipment.
In Brazil, MAP prices have exceeded USD 750/tonne CFR, though affordability remains a major issue. Farmers are resisting price hikes due to worsening affordability versus downstream commodity prices—by some measures, the worst in over a decade. Credit access is also a concern, with some distributors receiving no MAP inquiries at all. Nonetheless, suppliers remain confident and are in no rush to lower prices, as buyers still have requirements to cover for the Safrinha season.
DAP offers to Pakistan are reportedly in the low USD 760s/tonne CFR, though demand is virtually non-existent. The current breakeven for inland DAP sales in Pakistan is no higher than USD 720/tonne CFR. Even at that level, demand is weak, due to extremely low affordability for farmers. DAP sales to Pakistan have been minimal for several weeks. Previous transactions were made by importers speculating on a rise in domestic prices—an increase that has yet to materialise.
The outlook for processed phosphate prices remains bullish, with no relief expected before Q3—dependent on a significant increase in supply.
Potash Rises Amid Conflict Concerns
Potash prices rose this week across Southeast Asia, Northwest Europe, China and the US following recent contract settlements, while the market closely monitors the Israel-Iran conflict for potential supply disruptions. Israel’s potash production remains unaffected and is operating at full capacity, according to ICL.
ICL produced 3.7 million tonnes of potash in 2024, representing approximately 5% of global potash supply, and exported 3.4 million tonnes. The outlook for potash prices is bullish, although some concerns remain about the situation in Brazil, where sentiment suggests prices may have reached a ceiling due to farmers’ affordability issues. Prices have remained flat at around USD 363/tonne CFR for six weeks.
Limited buying and strong farmer resistance are keeping prices steady, with August offers near USD 370/tonne CFR struggling to gain traction. Market participants doubt prices will reach USD 380/tonne CFR, citing persistent farmer pushback and a widening gap between import costs and domestic prices, which is squeezing supply chain margins.
Ammonia Prices Steady Despite Tensions
Despite heightened tensions in the Middle East and the resulting impacts on regional supply, ammonia prices have, for the most part, remained stable, with supply-demand dynamics still largely balanced. However, confirmation of the latest rumoured deals could support sentiment going forward.
With Iranian producers reportedly focused on emptying their ammonia tanks due to the outbreak of conflict with Israel, several carriers are expected to load shortly, with talk of a spot cargo sold at below USD 250/tonne FOB for prompt loading. Further details about this potential deal are expected to emerge as the week progresses. Other suppliers in the wider region report no immediate uptick in enquiries from buyers in India and Turkey, who regularly receive Iranian cargoes.
According to the data below, Iran exported approximately 780,000 tonnes of ammonia by sea in 2024—significantly higher than the 583,000 tonnes shipped the previous year. So far in 2025, nearly 400,000 tonnes have been exported, the majority shipped to buyers on both the east and west coasts of India.
A loss of Iranian supply would be felt most acutely by Indian buyers. However, a greater concern would be any disruption in the Strait of Hormuz, which could impede the timely flow of a combined monthly average of 300,000 tonnes from key producers in Saudi Arabia and Qatar.
The region’s largest exporter, Ma’aden, is currently preparing to load three cargoes of approximately 25,000 tonnes each for term buyers east of Suez. Several other tankers transporting material for other major players are also expected to arrive in the region before the end of the month.
The top 10 ammonia-producing countries total 12.3 million tonnes, accounting for just over 60% of the global offshore trade volume of approximately 20 million tonnes.
As seen above, the top 10 ammonia-producing countries are more geographically diverse than those of urea. Nevertheless, the Iran–Israel conflict has widespread ramifications for trade flows. As mentioned, India stands to be affected the most due to its heavy reliance on Iranian ammonia imports.
Ammonia prices may have found a floor with both Iranian and Egyptian production offline as of June 19, while rising natural gas prices are also likely to support sentiment going forward.
