As the shockwaves from Hamas‘ unexpected strike on Israel reverberate, concerns are mounting over potential disruptions to the global supply of vital nutrients crucial for food cultivation.
The Port of Ashdod in Israel, strategically located just north of Gaza, plays an indispensable role in the country’s potash fertiliser exports. Due to the escalating conflict, the port has been plunged into emergency measures. This scenario, according to Ben Isaacson, an analyst at Scotiabank, threatens to compromise a significant 3% of the world’s potash supply.
The plot thickens with the looming shadow of Iran, a pivotal nitrogen exporter in the vicinity. Should Iran become embroiled in the Israel-Gaza conflict, the ramifications on the global nutrient market could be dire. Isaacson warns of a potential surge in prices for the crucial nutrient required for grain cultivation.
This spike could be a result of diminished supply coupled with surging premiums in Dutch TTF natural gas, an essential ingredient for producing nitrogen-based fertilisers.
In response to these geopolitical tremors, shares in leading fertiliser manufacturers have soared. Nutrien Ltd., a titan in the potash industry, saw its shares ascend by a notable 4.2%, marking its highest surge since last July.
Similarly, CF Industries Holdings Inc., a foremost nitrogen manufacturer, experienced a robust 6.2% increase, its most substantial monthly jump. Mosaic Co. wasn’t left behind, registering a 6.7% rise, its most significant intraday boost in nearly a year.
This year had witnessed a moderation in global fertiliser prices, offering a respite from the spikes of 2022, attributed to supply disruptions resulting from the Ukrainian conflict.
However, the situation could become graver if Iran, feeling the pull of the conflict, intervenes. The vital Strait of Hormuz, through which a staggering third of globally traded liquefied natural gas flows, could become a strategic chokepoint. Isaacson underscores the historical precedent of Tehran threatening its closure.
Already, experts like Alexis Maxwell of Bloomberg Intelligence had forecasted firmer nitrogen prices later this year, due to a nearly 10% swell in European natural gas prices spurred by a pipeline leakage in the Baltic.