China releases fertilizer reserves as Strait of Hormuz crisis disrupts supply

Friday 13 - 16:20

By: Dakir Madiha

China releases fertilizer reserves as Strait of Hormuz crisis disrupts supply

China has begun releasing nearly 10 million tons of fertilizer from its national reserves while boosting domestic production to record levels as the closure of the Strait of Hormuz enters its third week, threatening global agricultural supply chains at the start of the Northern Hemisphere’s spring planting season.

The intervention marks Beijing’s largest agricultural market response since U.S. and Israeli strikes against Iran on February 28 triggered a shipping crisis in the strategic waterway. Roughly one third of global fertilizer trade transported by sea passes through the strait.

Fertilizer prices have risen about 30 percent between late February and early March, according to the Fertilizer Institute, with urea, the most widely traded fertilizer globally, among the hardest hit.

China’s response combines increased production, controlled distribution and the use of strategic reserves. Domestic fertilizer producers are now operating at more than 93 percent of capacity, with daily output ranging between 210,000 and 220,000 tons, a seasonal record.

Authorities have also intervened to limit speculation. Provinces such as Shandong introduced caps on factory gate prices for urea to prevent price surges during the critical spring planting period.

On March 12, Sinofert issued a directive instructing distributors and buyers not to hoard, inflate prices or resell fertilizers during the planting season. The company warned that such practices would violate national supply security policies.

These measures follow broader resource control policies implemented by Beijing. In March, the National Development and Reform Commission banned exports of refined fuels to prevent domestic shortages of energy and agricultural inputs.

China had already suspended exports of phosphate fertilizers until August 2026 in a move aimed at protecting domestic food security. According to S&P Global, the decision reflects long term agricultural priorities rather than short term geopolitical developments.

However, the Strait of Hormuz disruption presents a direct challenge to China’s supply chain. The country relies on the Middle East for about 56 percent of its sulfur imports, a key ingredient used to produce phosphate fertilizers.

The crisis is affecting fertilizer markets worldwide. Qatar’s largest urea plant has shut down, Iran has reduced ammonia production, and fertilizer companies in India, Bangladesh and Pakistan have halted operations after losing access to natural gas supplies, according to an analysis by the Carnegie Endowment for International Peace.

International urea prices have jumped by about $130 per ton within a week, while European ammonia futures have risen by a similar amount.

In the United States, the American Farm Bureau Federation has urged the government to ensure secure passage for fertilizer shipments, warning that supply disruptions could threaten national food production.

Seth Meyer, former chief economist at the U.S. Department of Agriculture, told Fortune that farmers who delayed fertilizer purchases now face difficult decisions as planting season approaches.

Analysts say China’s extensive reserves and administrative control over key industries allow it to respond quickly to supply shocks. Consulting firm Trivium China noted that Beijing has long prepared for such disruptions through stockpiling and coordinated market interventions.

Even so, global supply disruptions may take time to resolve. Researchers at the Carnegie Endowment warn that even if the Strait of Hormuz reopens soon, restoring fertilizer production and transport could take weeks, time that many farmers in the Northern Hemisphere do not have as planting season begins.