Unlock the Editor’s Digest free of charge
Roula Khalaf, Editor of the FT, selects her favorite tales on this weekly e-newsletter.
The pinnacle of one of many world’s largest fertiliser firms has warned that heightened tensions within the Center East may set off a contemporary meals worth shock by straining international provide chains for crop vitamins and vitality.
Svein Tore Holsether, chief government of Norwegian group Yara, mentioned fertiliser teams and prospects have been “monitoring intently” the dangers across the Strait of Hormuz, by means of which 40 per cent of the world’s urea and 20 per cent of world LNG flows, warning that any disruption may ripple by means of international meals manufacturing.
Fertiliser markets have “been extraordinarily unstable within the final two weeks, and it reveals how related all the pieces is”, he instructed the Monetary Instances.
Holsether pointed to the recent shutdown of Israeli gasfields, which disrupted fertiliser manufacturing in Egypt, as an indication of how rapidly regional tensions can ripple by means of provide chains.
Tensions between Iran and Israel escalated sharply this month pushing up Brent crude above $80 per barrel earlier than falling again to the excessive $60s after a ceasefire was brokered earlier this week.
Business analysts have warned that greater than a fifth of the world’s urea output had stopped on account of battle and provide disruptions. “Iran has shut all ammonia crops for safety causes, whereas Egypt stays offline on account of halted Israeli fuel flows,” mentioned Sylvia Traganida, senior ammonia editor at consultancy ICIS.
Consultancy CRU warned Israel’s strikes on Iran and the retaliatory assaults “fed into main disruption to nitrogen markets” inside just a few days of the occasions and posed “ongoing threats to phosphate, potash and sulphur provide from the area”.
Nearly a 3rd of urea exports, 44 per cent of sulphur exports and practically a fifth of ammonia exports transfer by means of or are produced in nations west of the Strait of Hormuz, in line with information from CRU.
“The meals system is fragile,” mentioned Holsether. “If [energy prices] keep excessive over time, that may also spill into the meals system, prefer it did in 2021 and into 2022 as properly with the outbreak of the battle [in Ukraine].”
The final main disruption to fertiliser markets got here in 2022, when Russia’s full-scale invasion of Ukraine despatched pure fuel costs hovering and triggered a pointy rise in fertiliser prices, contributing to a worldwide meals worth disaster.
Since then, crop nutrient costs had eased because the pure fuel market had declined, however Europe’s fertiliser trade remained below stress as Russian imports took an even bigger share of the market, Holsether mentioned, as he returned from his first go to to Ukraine since Russia’s full-scale invasion in February 2022.
Whereas sanctions have curbed exports of Russian pure fuel, a important enter in nitrogen fertiliser, meals and crop vitamins have remained exempt, permitting Moscow to redirect its fuel by means of fertiliser manufacturing.
Holesther welcomed the EU’s current transfer to impose tariffs on Russian fertiliser however referred to as it overdue. He mentioned Europe wanted to keep away from “repeating errors” made in vitality imports with meals.
The Yara chief accused Moscow of weaponising meals and fertiliser, each by increasing fertiliser exports to extend international dependency on its provide and by concentrating on Ukraine’s civilian agriculture in a marketing campaign to destroy the nation’s function as one of many world’s agricultural powerhouses.
“There’s the navy battle, however there’s additionally a battle the place meals is getting used as a weapon,” Holsether mentioned, including that greater than 20 per cent of Ukraine’s farmland was now mined, occupied or unusable.
Earlier than the battle, Ukraine’s meals exports, which included as much as 50mn tonnes of cereals, fed about 400mn folks a 12 months.
The nation’s grain and oilseed manufacturing fell from 78mn tonnes in 2023 to 72.9mn tonnes this 12 months, Holsether mentioned, reflecting the mounting affect of battle on the nation’s agricultural output.
