UAE fertiliser giant warns of global food impact as it turns to trucks to bypass Hormuz
Fertiglobe is using fleets of trucks to transport fertiliser across desert terrain to ports outside of the shipping chokepoint.
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One of the world’s largest fertiliser companies has begun trucking products to ports outside the Strait of Hormuz, in what its chief executive described as an “extraordinary workaround” to keep global supplies moving amid ongoing disruption at the critical shipping chokepoint.
Under normal conditions, cargo from the United Arab Emirates’ Fertiglobe is shipped through Hormuz on vessels carrying between 30,000 and 50,000 tonnes.
In contrast, each truck carries just 20 to 25 tonnes of fertiliser, hence requiring a huge fleet covering long distances overland and across desert terrain before being loaded onto ships.
The shift has made operations significantly more complex, expensive and resource-intensive.
“It's an extraordinary workaround,” Fertiglobe CEO Ahmed El-Hoshy told CNA on Tuesday (May 5).
“There’re so many, many more movements. We're working closely with our peers (in) logistics and services, as well as the broader Abu Dhabi ecosystem, including ports, to find ways to get fertiliser to global consumers.”
Despite the challenges, El-Hoshy said the company has managed to meet most of its commitments so far.
The state-backed producer, a unit of oil giant Abu Dhabi National Oil Company (ADNOC), supplies more than 45 countries across the Americas, Europe and Asia-Pacific, including major markets such as India, Bangladesh and Australia.
In some cases, the firm has rerouted shipments from as far afield as Africa to meet demand.
“We've been able to fulfill almost all (our) customers’ orders. It is a bit challenging, and there are some exceptions,” said El-Hoshy. “Our focus is to try to … ensure fertiliser can get to sites in time for the planting season.”
SOARING FERTILISER PRICES
The surge in fertiliser prices far outweighs the workaround’s high transport costs, El-Hoshy said earlier.
Fertiglobe last week reported a 173 per cent jump in first-quarter profits, driven by soaring prices caused by the Middle East conflict.
The World Bank said urea prices have risen about 60 per cent, with overall fertiliser prices projected to climb 31 per cent this year. Urea is the world’s most widely used nitrogen fertiliser.
Before the Iran war began on Feb 28, the Strait of Hormuz carried about a fifth of global oil supply and around a third of seaborne fertiliser trade. Its virtual closure has since led to sharp increases in commodity prices.
RISING RISKS FOR GLOBAL FOOD SUPPLY
El-Hoshy, who is also vice chair of the International Fertilizer Association, warned of a looming supply crisis with implications for global food production.
“We’re looking at a fertiliser crisis. It’s (not) just a matter of logistics. There’s a lot of direct and indirect knock-on effects for the global supply chain,” he said.
Beyond shipping disruptions, fertiliser production is highly energy intensive. Constrained oil and gas flows have also forced some fertiliser plants in the Gulf and beyond to slow production or shut down.
Signs of strain are already emerging in the agricultural sector. Some farmers are shifting away from fertiliser-intensive crops such as corn and wheat – a move that could further tighten supply and drive food prices higher.
CRITICAL MONTHS AHEAD
Analysts warn fertiliser remains difficult to substitute at scale, presenting an immediate risk of reduced harvests and adding to inflationary pressures.
The World Food Programme has warned that prolonged disruption could push up to 45 million more people into acute food insecurity this year.
“About half of the world's 8 billion people rely on nitrogen fertilisers like urea … to meet calorie and food demand. So, it is absolutely critical to ensure that the fertiliser gets (to farmers) and the crop yields are there,” El-Hoshy said.
With the disruption now stretching beyond two months, he said some decline in crop yields is increasingly likely, particularly if adverse weather conditions such as El Nino exacerbate the situation.
If the Strait of Hormuz remains effectively closed into the next quarter, the consequences could become more severe as fertiliser fails to reach farms ahead of upcoming key planting windows, El-Hoshy warned.
“I can only hope that weather is supportive so we can get some good crop yields, and that we find green corridors to be able to move fertiliser more efficiently and more cost effectively into the global grower space,” he added.
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