Indian Urea Producers Shut Plants as Iran War Cuts LNG Flows

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(Bloomberg) — Some urea companies in India have shut down plants or moved up annual maintenance after Qatari supplies of liquefied natural gas, a key feedstock, were suspended due to the Iran war.

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Manufacturers, including top producer Indian Farmers Fertiliser Cooperative Ltd., have either halted some of their facilities or started routine upkeep, according to people familiar with the matter. Restarting a paused plant could take as long as a month, provided LNG supplies resume, they added, asking not to be named because the matter is private.

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LNG is the primary feedstock for urea production, serving as an energy source and a key input in making the world’s most widely used fertilizer. Gas supplies to India’s fertilizer industry are currently about 70% of their requirement, the people added.

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Any long-drawn halt to LNG supplies could force India — the world’s top importer of urea — to ramp up purchases, pushing up global prices and hampering government efforts to trim its subsidy burden. Fertilizer demand peaks during the monsoon season that begins in June. 

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Higher farm input costs in the South Asian nation would also have implications for crop prices — and broader inflation — as the country is the world’s biggest grower and exporter of rice and the No. 2 producer of wheat, cotton and sugar.

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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, a spokesperson for the fertilizer ministry said. Stockpiles of fertilizer, including urea, were about 18 million tons as of March 10, up almost 37% from a year earlier, ministry data show.

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A senior official at fertilizer maker IFFCO didn’t immediately respond to an email sent after office hours.

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Thailand, Bangladesh, India and Vietnam are dipping into the spot market to secure near-term LNG supplies, but some tenders for this month — from India’s Gail and GSPC — have gone unawarded, indicating a shortage of immediately available fuel. 

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India’s fertilizer sector relies heavily on LNG imports, with a significant share sourced from the Middle East, according to the Fertiliser Association of India. The industry is working with the government to prioritize allocations for urea output, the group added. 

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India’s fertilizer production and imports — including urea, di-ammonium phosphate and potash — rose to 65 million tons in the 10 months ended Jan. 31, up from 57 million tons a year earlier, the industry group said. So far, strong domestic production and timely imports have ensured that supplies will meet farmers’ demand, it added.

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(Updates to add LNG supply concerns in eighth paragraph)

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