Hormuz Fertilizer Crisis: Sulfur Emerges as the Critical Bottleneck

Urea prices have recovered, but sulfur shortages are squeezing phosphate production. The disruption exposes a vulnerability in global commodity supply chains, with implications for fertilizer producers, agricultural margins and trading houses.

The Strait of Hormuz is creating a fertilizer crisis that oil markets alone cannot explain. While alternative export flows have helped stabilize nitrogen fertilizer prices, sulfur has become a critical bottleneck, threatening phosphate production far beyond the Persian Gulf.

No fertilizer cargoes crossed the strait in September or October, according to Fertilizer Daily. Before the war, roughly 20% of internationally traded nitrogen fertilizer passed through Hormuz, while the Gulf supplied about half of the world's traded sulfur.

For commodity traders, the distinction is crucial. Nitrogen supply has found some relief through alternative exporters. Sulfur has not. The result is a supply shock moving from energy infrastructure into chemicals, fertilizer manufacturing and agriculture.

Urea Recovers as Sulfur Prices Surge

Nitrogen fertilizer markets have demonstrated their ability to adapt. China increased nitrogen fertilizer exports by approximately 47%, while US exports rose about 60%. By the end of August, urea prices had returned to January levels, according to the International Food Policy Research Institute (IFPRI).

That recovery reflects the availability of alternative supply, not the disappearance of geopolitical risk. Natural gas prices, export policies and seasonal demand will continue to influence nitrogen markets.

Sulfur presents a more difficult problem. Recovered primarily as a byproduct of oil refining and natural gas processing, it cannot always be produced quickly in response to higher prices. Supply depends on activity elsewhere in the energy system, while export availability is concentrated among a relatively small group of producers.

Sulfur prices more than doubled to above $1,000 per tonne during the disruption, while phosphate fertilizer prices climbed approximately 25–30%, according to the figures cited in recent market reporting.

The divergence exposes a weakness in the global fertilizer trade: replacing a lost cargo is one challenge; replacing the production capacity behind it is another.

Why Sulfur Matters to Phosphate Production

Sulfur is essential to the production of sulfuric acid, which phosphate producers use to process phosphate rock into phosphoric acid and, ultimately, fertilizers such as diammonium phosphate (DAP).

When sulfur becomes scarce or prohibitively expensive, phosphate producers face higher costs, tighter margins and potential production cuts. Alternative suppliers cannot necessarily fill the gap if they face the same input constraints.

The consequences extend beyond fertilizer. Sulfuric acid is also used in metal processing, including copper production, creating competing industrial demand for a constrained input.

The disruption has already reached producers. Mosaic has idled two Louisiana plants amid pressure on the fertilizer market. In India, higher fertilizer costs threaten to push the government's subsidy bill above 3 trillion rupees, compared with 1.71 trillion rupees budgeted.

For agricultural markets, the risk is that elevated input costs coincide with critical purchasing and planting windows. Farmers may delay purchases or reduce fertilizer application, squeezing yields and farm margins. Higher fertilizer prices will not automatically translate into higher grain prices, but a prolonged shortage could alter production economics across major agricultural exporters.

The Commodity Trading Advantage

The Hormuz crisis highlights three factors commodity traders should watch: supply concentration, logistical flexibility and access to alternative producers.

For nitrogen, Chinese export availability, US shipments and natural gas prices will help determine whether the market can maintain its recovery. For phosphate, sulfur prices, export volumes, plant operating rates and DAP and MAP premiums offer more immediate signals of stress.

A reopening of Hormuz could release delayed cargoes, but it would not instantly restore production or reverse the effects of export restrictions. Logistics can redirect available supply; they cannot manufacture a missing feedstock.

Trading houses with diversified sourcing, storage capacity and established producer relationships may be better positioned to navigate the disruption. Yet even the strongest logistics networks have limits when supply itself becomes scarce.

The broader lesson is that commodity security depends on more than moving material from one market to another. It depends on controlling access to the inputs that make production possible.

Oil has found alternative routes out of the Gulf. Nitrogen fertilizer has found alternative exporters. Sulfur remains the weak link, turning a regional shipping crisis into a wider industrial and agricultural supply shock.