Urea Prices Surge as India Faces Critical Shortages: Will China’s Export Quotas Provide Relief?

Disruptions in shipping through the Strait of Hormuz are reshaping the global fertilizer market. As the world’s largest urea importer, India is grappling with a fertilizer production crisis triggered by a shortage of liquefied natural gas (LNG). Current urea stockpiles in India can only meet agricultural demand for a few months, while the sowing season rapidly approaches. The Indian government has formally requested China to ease its 2026 urea export quotas—a pending decision that could prove crucial for spring planting supplies.

Supply Chain Shock: LNG Shortages Halt Fertilizer Production

Shipping risks in the Strait of Hormuz could significantly affect India’s energy imports. Approximately two-thirds of India’s LNG comes from the Middle East, much of it transported through the Strait. Any disruption would quickly ripple through the fertilizer supply chain, impacting both supply and prices.

Some Indian companies are already feeling the strain. Balaji Amines has suspended production of methylamine and ethylamine after its ammonia supplier declared force majeure. IFFCO, one of India’s largest fertilizer producers, has initiated partial urea output cuts at some plants. Meanwhile, the state-owned gas company GAIL has launched emergency spot-market purchases to ease supply pressures.

On the international front, energy price volatility and supply concerns have pushed global urea prices up roughly 20% since the beginning of the year. Prices for related inputs such as ammonia and sulfur have also risen to varying degrees.

Inventory Pressure: How Long Can Current Stockpiles Last?

Government data shows that as of early 2026, India’s urea stocks stand at around 5.9–6.2 million tons, slightly higher than the same period last year. Total fertilizer stockpiles exceed 17 million tons.

Based on typical agricultural consumption, this level of inventory can cover near-term demand. However, as the June sowing season approaches, market participants remain concerned about subsequent supply replenishment.

Several urea import contracts are expected to arrive in the coming months. Industry observers believe that if imports continue at a normal pace, short-term supply remains manageable. But if energy supplies or shipping disruptions persist, stocks could deplete faster.

India’s annual urea demand is approximately 37–39 million tons, with 20–25% dependent on imports. While most supply comes from domestic plants, production is heavily reliant on natural gas, a large portion of which is imported. Consequently, India’s fertilizer industry remains highly sensitive to international energy price fluctuations, which could also increase the government’s fertilizer subsidy burden.

Uncertain Export Policy: China’s Quotas in the Spotlight

A critical variable in India’s international urea strategy is China’s pending export quota decision.

Although China is not India’s primary urea supplier, it plays a key role as a “marginal stabilizer.” Around 70% of China’s urea capacity is coal-based, making it largely insulated from global gas price swings. When Middle Eastern supply uncertainties rise due to Strait of Hormuz risks, China’s coal-based urea represents one of the few reliable surplus sources for export.

China’s quota decisions directly impact global supply-demand balance. Tight quotas would intensify existing market pressures, while moderate exports—whether or not shipped directly to India—could help ease India’s competition for Middle Eastern supplies.

Why Supply Diversification Is Hard to Achieve Quickly

India has attempted to diversify its fertilizer sources, signing long-term phosphate supply deals with Morocco, increasing potash imports from Russia, and expanding trade with Southeast Asian nations. Yet, the crisis highlights the limitations of short-term alternatives.

The root issue lies in a highly concentrated supply structure: India’s urea production relies predominantly on natural gas, much of which is imported from the Middle East. Any disruption in this region affects both energy supply and fertilizer production, leaving short-term supply chain risks largely unmitigated.

MP Sukumaran Nair, former director of India’s Central Fertilizer Technology and Management Institute, stated: “Geopolitical fluctuations in distant waters can ultimately have a direct impact on India’s farmland stability.” His observation underscores the inherent vulnerability of agricultural supply chains in a globalized world.