In the first quarter, overseas urea prices soared by 90%, while domestic spring farming supply remained "on hold."

How does the US-Iran conflict trigger a global fertilizer supply crisis?

Reporter Dong Peng, 21st Century Business Herald

Since the escalation of the US-Iran conflict, international markets have seen nitrogen fertilizer lead the rally, phosphates follow suit, and potash remain steadily rising.

Taking the most important nitrogen fertilizer, urea, as an example, data from Longzhong Information shows that as of March 31, China’s spot (FOB, intermediate price) urea reached $752.5 per ton, up 92.8% from $390 per ton at the beginning of the year.

This is not an isolated case; sample prices in regions like the Baltic Sea and the Arabian Gulf also generally exceeded $600 per ton, with a sharp surge appearing in March this year.

In contrast, domestic markets, under the backdrop of spring planting and supply security, saw overall stable prices for fertilizers like urea, with spot prices in Henan and Shandong at the end of March not exceeding 1,900 yuan per ton.

This caused the price gap between domestic and international markets to rapidly widen, from about 1,000 yuan per ton at the start of the year to over 3,000 yuan.

Higher premiums in overseas markets have also attracted market attention, with several investors recently inquiring about urea export conditions from companies like Sichuan Meifeng, Hubei Yihua, and Yuntianhua.

However, because export quotas remain unclear, listed companies currently find it difficult to provide specific responses.

“After the domestic spring planting is completed, the company will actively coordinate with relevant associations and self-regulatory organizations to strive for export conditions and ensure the company’s reasonable profit levels,” Yuntianhua recently stated during a survey.

Major global urea producers include China, India, Iran, and Russia, with Iran and Russia exporting larger quantities.

Relevant data shows that by 2025, global urea exports are expected to reach about 50.8 million tons, with Iran exporting 7.8 million tons, accounting for roughly 15% of the global share.

At the same time, Qatar in the Middle East also plays an important role in the global nitrogen fertilizer supply system.

“Iran has essentially imposed a blockade or strict control over the strait since early March. Although its official statements are tactically vague, the latest directives clearly require maintaining the blockade,” said GreenWave Futures. This situation has nearly halted transportation through this critical energy passage, with hundreds of ships stranded, and many Gulf countries forced to cut production.

The organization pointed out that nearly one-third of global urea and 44% of sulfur are shipped through the Strait of Hormuz. When transportation through the strait is restricted, many countries’ urea factories halt operations, including Qatar’s 5.6 million-ton-per-year largest urea plant.

This has disrupted the previously balanced supply and demand, causing urea prices to accelerate upward since March.

Taking FOB prices of urea in the Arabian Gulf (Middle East/Persian Gulf) as an example, this price is the most core spot reference in the global urea market, especially under the context of the US-Iran conflict, further strengthening its role as a market indicator.

From this sample price, the impact of the US-Iran conflict has been particularly evident this year.

Data from Longzhong Information shows that in January and February, the intermediate FOB spot price of urea rose from $394 per ton to $492.5 per ton, still within the price range since the second half of 2025, with fluctuations within normal limits.

Since the escalation of the US-Iran situation on February 28, the restricted navigation through the Strait of Hormuz has significantly accelerated local urea price increases.

By the end of March, FOB prices of Arabian Gulf urea had risen to $742.5 per ton, with the increase significantly larger than in the previous two months, and the total rise roughly aligned with China’s FOB prices.

Driven by this, prices of international phosphates and potash fertilizers have also risen to varying degrees.

Phosphates, supported by sulfur prices and export policies of major producing countries, have seen diammonium phosphate (DAP) rise to $700–800 per ton, while potassium chloride has also experienced slight increases at high levels.

“Recently, international potassium chloride market prices have shown a clear upward trend. Under the influence of Middle East tensions, most international markets have seen slow price increases,” Longzhong Information stated on April 1.

According to the organization, the impact of Middle East tensions on potash fertilizer mainly manifests in transportation costs. Due to rising oil prices and sea freight insurance, shipping costs in many regions have increased by over 100%.

Cangzhou Salt Lake Co., Ltd. also pointed out during a conference call on April 1 that the current potash fertilizer market is affected by global supply chain fluctuations, geopolitical factors, and seasonal agricultural demand, making prices prone to rises but difficult to fall.

While Middle East tensions have driven up overseas fertilizer prices, the impact on the domestic market has been limited.

Based on price comparisons from sources like China Chemical Online, domestic spot prices for urea in the first quarter increased by only about 150 yuan per ton, far less than the overseas markets mentioned above. As of the end of March, the mainstream market price for small granular urea in Henan was 1,860 yuan per ton.

Overseas increases and stable domestic prices have widened the price gap between the two markets.

Using historical exchange rates, at the beginning of this year, China’s FOB spot urea was about 2,726 yuan per ton, while the mainstream price in Henan was 1,710 yuan per ton, maintaining a difference of around 1,000 yuan.

After the surge in prices in March, the export price has approached 5,200 yuan per ton, expanding the gap to about 3,300 yuan.

The reason domestic fertilizer prices have remained stable is due to multiple factors.

First, differences in raw material structures: Middle Eastern urea is almost entirely derived from natural gas, while domestic raw materials mainly come from coal, supplemented by natural gas, with coal accounting for about 80%, thus less affected by external energy market shocks.

According to Huawen Futures statistics, by 2026, domestic new urea capacity will total 5.27 million tons, with only Xinjiang Aofu Chemical’s 500k-ton-per-year capacity using gas-based technology; the rest are coal-based.

Second, since 2022, domestic urea capacity has been continuously released, with overall production increasing accordingly.

Data from the China Nitrogen Fertilizer Industry Association shows that by 2025, national urea production will reach 500k tons, a 7.1% increase year-on-year.

Looking further into 2026, the operating rate and daily output of coal-based urea are at their highest since 2022, while major coal prices are at their lowest in the same period, keeping costs relatively stable.

Third, March and April are still critical periods for spring planting and supply security. Several listed companies have explicitly stated they will strictly implement policies to stabilize fertilizer supply and prices, ensuring national food security.

“Industry association price caps provide clear price ceilings. The Nitrogen Industry Association continues to publish maximum guidance prices each month, with the highest limit in mainstream regions stable at 1,830 yuan per ton,” GreenWave Futures also pointed out. Under the influence of off-season stock releases and association price guidance, the upward space for urea prices may be limited, and the market is gradually returning to a supply-demand balance.

At the 2026 national spring nitrogen fertilizer market analysis meeting in March, Gu Zongqin, chairman of the China Nitrogen Fertilizer Industry Association, stated, “Overall, in 2025, domestic nitrogen fertilizer supply was sufficient, and prices declined significantly, successfully fulfilling the ‘supply stabilization and price stabilization’ task. It is worth noting that, through strengthening industry self-discipline, urea achieved orderly exports, with profitability significantly enhanced, exploring successful experiences for China’s nitrogen fertilizer exports.”

As a staple for food security, China has strengthened regulation of fertilizers like urea in recent years.

On October 16, 2025, the Ministry of Commerce issued the “2026 Fertilizer Import Tariff Quota Total, Allocation Principles, and Related Procedures,” which clearly states that the total import tariff quota for fertilizers in 2026 is 13.65 million tons, with urea quotas at 3.3 million tons.

This quota is lower than the 4.89 million tons of actual exports in 2025, but most institutions expect export restrictions to loosen after spring planting, and export volumes may further increase this year.

“From the supply side in China, the pressure of new capacity coming online in 2026 is significant. Opening exports and expanding quotas may be the most effective way to alleviate oversupply. There is an expectation that export quotas will further expand in 2026,” Huawen Futures pointed out.

The Dongzheng Derivatives Research Institute predicts that in 2026, China’s urea export quota may increase by 2 to 3 million tons compared to 2025, reaching 7 to 8 million tons.

Against the backdrop of nearly 200% premium of overseas urea prices over domestic prices, if the export quota expansion expectations are realized, China’s urea industry could see a phase of “volume and price increase” in overseas markets.

In this context, export quotas have become a core variable influencing the domestic and international supply-demand landscape and a hot topic in capital markets. Recently, multiple investors and institutions have discussed this issue through interaction platforms and conference calls.

For example, Hubei Yihua was asked, “Is the company operating at full capacity? What are the 2026 export quotas for urea and diammonium phosphate? How is the current export situation?”

Some investors even suggested to Sichuan Meifeng, “The price gap between domestic and overseas urea is huge. Since the industrial-grade urea for vehicle use is outside the quota, is the company fully seizing this historic opportunity to expand vehicle-grade urea exports and reverse last year’s losses?”

It should be noted that the government does not disclose specific enterprise export quotas, and to date, there are no authoritative data on the 2025 urea export volumes of individual companies. Listed companies can only give vague responses like “actively participating.”

Yuntianhua recently stated that after the domestic spring planting, the company will actively coordinate with relevant associations and self-regulatory organizations to strive for export conditions and ensure reasonable profitability.

However, some relatively clear rules in the Ministry of Commerce’s documents can serve as references. For example, “The enterprise’s annual verification rate will be used as the basis for setting the next year’s starting tariff quota.”

The verification rate is a key indicator of whether a company has fully utilized its export qualification. For example, if a company receives a quota of 100k tons in 2025 but exports only 80k tons, its verification rate is 80%.

According to the principles above, starting from 2026, the initial (tariff quota) volume will be based on the 2025 starting volume, adjusted according to the 2025 verification rate. Companies with verification rates above 80% will see a 40% increase; those with rates between 25% and 49% will remain unchanged; and those below 25% will see a 50% reduction…

Large-capacity, high-verification-rate companies that have taken on more domestic supply tasks may also receive more export quotas in the future.