Gulf conflict: LNG squeeze may impact urea output ahead of kharif season

NEW DELHI: India may face serious disruptions in supply of fertilisers and raw materials in the next kharif season — starting in June — if the blockade of the Strait of Hormuz continues due to the conflict in West Asia, industry insiders said. They added that there is no immediate crisis because it is a lean season.

Any reduction in supply of liquefied natural gas (LNG) to urea manufacturers in the coming weeks could impact production of the key soil nutrient ahead of the kharif planting season, a fertiliser company executive said, adding that they are keeping a close watch on developments. Kharif crops account for more than half of India’s food grain production, as major crops such as rice, pulses, oilseeds, cotton, and sugarcane are sown during this season.




On average, fertiliser companies produce around 2.5 million tonnes (MT) of soil nutrients per month. If LNG supplies are not normalised, production could be severely affected, industry watchers said, highlighting that production and stocking of fertilisers usually begins from March to ensure smooth distribution.

At present, 60% of LNG used in urea manufacturing is imported from Qatar, and India has a long-term agreement in place. Currently, 30 out of 32 urea manufacturing units use natural gas as feedstock.

Industry watchers also said that apart from supply issues, blockade of key shipping routes in the Gulf would push up prices of DAP and urea, which would directly impact the govt’s food subsidy expenses.

Regarding the current level of stocks, people involved in the sector said that by the end of Feb, urea stocks stood at 5.5 MT compared to 4.9 MT a year ago. The current DAP stock with companies is projected at around 2.5 MT, against 1.3 MT a year earlier. In the case of complex fertilisers, NPK (nitrogen, phosphorus, and potassium) stocks are higher than 5.4 MT compared to 3.2 MT a year ago. The increased stock is due to a surge in imports during the current financial year.
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