West Asia Crisis Impacts India's Fertiliser Production and Asia's Supply Chains

The West Asia crisis is severely disrupting India's fertiliser production and broader Asian supply chains, driven by energy route disruptions via the Strait of Hormuz. A Morgan Stanley report indicates feedstock shortages for chemicals and fertilisers, leading to production curtailments across Asia, including India. Prices for petrochemical products have surged, and global nitrogen fertiliser output is also affected. Asia, heavily reliant on West Asia for energy and fertiliser, faces significant vulnerability, with the crisis's duration determining the full extent of disruption.

The ongoing West Asia crisis is profoundly affecting India's fertiliser production and broader energy-linked supply chains across Asia, encompassing fertilisers, chemicals, and manufacturing. A Morgan Stanley report attributes this to disruptions in key energy supply routes, particularly the Strait of Hormuz, which is leading to constraints in crude and natural gas flows. These disruptions are causing severe feedstock shortages, impacting availability for crucial petrochemicals like propane and naphtha, and consequently, fertiliser production. Asia is particularly vulnerable, relying on West Asia for about a quarter of its energy needs in crude oil, LNG, and propane, and approximately 14% of its fertiliser requirements.The impact is already visible: around 25 million tonnes per annum (mntpa) of petrochemical capacities and roughly 10 mnt of fertiliser capacity have faced curtailments across countries such as India, South Korea, Taiwan, and Thailand. India and Bangladesh have seen fertiliser production affected by limited feedstock, prompting India to explore alternative urea sources. Globally, nitrogen fertiliser production has also reduced, equivalent to over 5.5 million tonnes or 4% of effective global urea annually. The scarcity has pushed downstream polymer and intermediate prices up by 15-25% in recent weeks. Morgan Stanley stresses that the crisis's duration is critical; a prolonged situation could force economies to seek alternative fuels or curb industrial energy consumption.