In 2022, the Strait of Hormuz played a critical role in global trade, carrying around 30% of internationally traded fertilizers, 25% of liquefied natural gas (LNG), and 20% of crude oil shipments. In 2026, as geopolitical tensions escalated and Iran began restricting shipping through this narrow corridor, markets reacted immediately: energy and fertilizer prices surged as supply chains faced sudden uncertainty.
The importance of the Persian Gulf goes well beyond transit. The region is also a major hub for LNG production, and for the production of nitrogen and phosphate fertilizers. As LNG is a crucial feedstock for nitrogen-based fertilizers such as urea and ammonium nitrate, disruptions in energy flows are rapidly transmitted into agricultural markets, amplifying the initial shock and affecting food production costs worldwide.
What began as a localized disruption in a strategic chokepoint has since evolved into a broader set of responses across global fertilizer markets, as other exporting countries adjust their trade policies in reaction to these developments. This dynamic is particularly important given the concentration of global fertilizer exports among a small number of major suppliers.
Based on four-digit HS codes 3102, 3103, 3104, and 3105, and using average export values over 2023–2025, China and Russia together account for 28% of global fertilizer exports. Russia is the largest exporter, while China ranks third. Disaggregating by product category, Russia is a leading exporter in nitrogenous (3102), potassic (3104), and mixtures (3105), whereas China stands out in nitrogenous (3102), phosphatic (3103), and mixtures (3105).
Given their significant share in global markets, trade policy decisions in these countries can have substantial effects on an already tight global fertilizer market.
Russia’s Early Response and Later Adjustment
On March 24, 2026, Russia announced export restrictions on ammonium nitrate (HS code 310230), targeting a set of countries that together accounted for 87% of its ammonium nitrate exports in 2025, a market worth approximately $717 million. To gauge the size of this market, ammonium nitrate represented 16% of the country’s total nitrogen fertilizer exports in 2025. The main nitrogen fertilizer exported was urea (310210), which accounted for 68% of Russia’s nitrogen fertilizer exports in 2025.
Latin America and the Caribbean (LAC) would likely have been the most affected region, accounting for 49% of those exports. Brazil and Guatemala would have borne the largest impact, representing 40% and 4% of total 2025 exports. Had the restrictions remained in place, as much as 95% of Russia’s ammonium nitrate exports to the region could have been affected. Fortunately, Russia's measure was lifted on April 21, 2026, without causing any serious consequences.
Figure 1
Once the restrictions on ammonium nitrate were lifted, Russia introduced new export restrictions on fertilizer mixtures (HS 3105), effective from June through November 2026. Although these measures apply to a different fertilizer category, they continue to affect global fertilizer trade and could have important implications for importing countries. Based on 2025 trade patterns, approximately 78% of Russia's fertilizer mixture exports would be affected by the new restrictions, with LAC accounting for 37% of the impacted trade. Among individual importers, Brazil and India would be the most exposed, representing 26% and 32% of Russia's 2025 exports of fertilizer mixtures, respectively.
China’s Reaction and Continued Policy
Beginning March 14, 2026, China implemented broad export restrictions covering virtually all fertilizer categories: nitrogenous fertilizers (HS 3102), phosphatic fertilizers (HS 3103), potassic fertilizers (HS 3104), and compound or mixed fertilizers (HS 3105)1.
Unlike the ammonium nitrate measure applied by Russia, China's restrictions apply to all destination countries and remain in effect as of this writing.
Previously, in response to the Russian invasion of Ukraine in February 2022, China waited five months before taking action. In July 2022, it reduced export quotas for phosphate fertilizers by 45% compared to the previous year, affecting 61 countries (according to Global Trade Alert). This measure remained in place for six months, through the end of 2022.
Although the quota reduction formally applied to only one category of fertilizer, exports of other major chemical fertilizers also declined significantly. Compared to 2021 levels, China’s exports fell by 46% for urea, 24% for triple superphosphate (TSP), and 88% for potassium chloride.
Figure 2
In comparison, China’s response in 2022 was both delayed and partial. The policy targeted a single category of fertilizers by reducing export quotas, even though in practice shipments of other fertilizers were also reduced. It is also important to consider the main destination markets for these products: urea exports are primarily directed to India, Ethiopia, and Sri Lanka; anhydrous ammonia to Vietnam and Morocco; ammonium sulfate to Brazil; ammonium nitrate to Vietnam and Laos; triple superphosphate (TSP) to Brazil; potassium chloride to Vietnam and Malaysia; and diammonium phosphate (DAP) to India and Bangladesh.
Figure 2
By contrast, the current situation involves a more extensive restriction, with China halting exports across a broader range of fertilizer products. However, this is occurring within a different time window and on top of the closure of the Strait of Hormuz, which could lead to distinct impacts on agricultural production across importing countries. If this measure continues through the end of the year, as China did in 2022, the major importers of nitrogenous fertilizers and superphosphate (TSP) from China will undoubtedly be affected. These include Brazil, India, Ethiopia, Vietnam, Morocco, and Laos for nitrogen (depending on the nitrogen product), and Brazil and Argentina for phosphate. The impacts could be even more pronounced for the latter, as they have not yet secured sufficient imports to meet their seasonal demand (see the latest blog).
Egypt Joins the List of Restricting Exporters
Egypt has also joined the group of exporters tightening fertilizer trade policy. The Egyptian government imposed an export tax on nitrogenous fertilizers (HS 3102), in effect from May through August 2026. Egypt is the fourth-largest global exporter of nitrogenous fertilizers, accounting for 6% of total 2025 exports, so the measure adds a further layer of tightening to an already strained global nitrogen fertilizer market, alongside the restrictions from Russia and China described above.
The Amplification Paradox
There is a counterintuitive dynamic at the heart of this crisis that policymakers urgently need to understand. When a localized disruption occurs, the initial impact on global trade is often proportional and containable. The real danger emerges when other major exporting countries respond to the initial disruption by imposing restrictions of their own.
Rather than stabilizing markets, simultaneous export curbs by multiple suppliers cause a sharp contraction in global supply, amplifying price volatility and deepening shortages. A problem that begins in one corridor or one country cascades into a systemic global disruption.
Paradoxically, the more efficient response would be the exact opposite: alternative exporters stepping up their supply to fill the gap, smoothing prices and reducing uncertainty for importers. In practice, however, domestic concerns almost always prevail, triggering what might be called a “race to close.” The actions of China and Russia, coming on top of the Hormuz disruption, represent exactly this kind of compounding scenario.
Another potential way to ease the pressure created by these export restrictions is for other countries to increase their own fertilizer production, reducing reliance on major exporters that have imposed restrictions. Some countries are already moving in this direction, including Mexico, Trinidad and Tobago, and Guyana. However, this represents a medium- to long-term solution and is unlikely to address current or near-term shortfalls.
In Trinidad and Tobago, Nutrien halted nitrogen fertilizer production in October 2025. Although the country has abundant natural gas resources, restarting large-scale production would require substantial investment, infrastructure upgrades, and a reliable energy supply. Given the capital- and energy-intensive nature of nitrogen fertilizer production and its sensitivity to global fertilizer and energy prices, a rapid restart is unlikely without a finalized plan and secured financing. Even if production resumes, output would likely remain modest relative to major global producers and would take years to reach a meaningful scale.
The Guyana Ammonia and Urea Plant (GAUP) project is at a more advanced stage. This public-private partnership aims to produce 300,000 tonnes of ammonia and urea annually, with production expected to begin in 2027–2028. However, its success depends on the timely completion of the Phase Two Gas-to-Energy project, the appointment of a qualified EPC contractor and technology licensor, and effective management of financing and operational risks. If completed on schedule, the plant could help meet domestic demand and supply nearby markets. Nevertheless, its planned capacity is small relative to global urea production, meaning it could reduce local import dependence and improve regional supply resilience but would not materially offset large-scale regional or global fertilizer shortfalls.
The consequences for food security
The chain of restrictions described throughout this piece ultimately reaches the tables of millions. When global fertilizer supply tightens and prices increase, farmers, especially in middle- and low-income countries, are forced to adapt. They may switch to less input-intensive crops, cut back on fertilizer use, or rely on lower-quality substitutes. The result is straightforward: less diversity in production and, more critically, lower yields.
This gap between potential and actual output reduces food availability in global markets, pushes consumer prices upward, and increases the vulnerability of import-dependent countries. What starts as a geopolitical disruption and is amplified by trade policy decisions can ultimately limit access to food for the world’s most vulnerable populations. Breaking this chain through greater coordination among exporters and more diversified supply goes beyond improving market functioning.
Commodity prices have remained relatively stable due to adequate global stocks, but this has not translated into better outcomes for farmers. On the contrary, rising input costs—particularly for fertilizers and energy—are squeezing profit margins. As the gap between input costs and output prices widens, farmers’ incomes decline, weakening their livelihoods and reducing their purchasing power.
Figure 4
This dynamic has broader social consequences. As seen during previous crises such as COVID-19, families cut back on food spending when household incomes come under pressure. This often leads to a shift toward cheaper, less diverse diets, with potential long-term implications for nutrition and food security.
|
|
🖋️ About the author Valeria Piñeiro is the Director of IICA’s Directorate of Technical Cooperation. She previously served as a Senior Research Coordinator at the International Food Policy Research Institute (IFPRI). She holds a PhD in Agricultural Economics from the University of Maryland and is also a faculty member in the Advanced Academic Programs at Johns Hopkins University. |
BlogIICA Editorial Committee
- Joaquín Arias Segura, Coordinator of OPSAA, IICA.
- Eugenia Salazar, Economist, OPSA, IICA
*The opinions expressed in this blog are those of the author and do not necessarily reflect the views of IICA or its member countries.
Notes
Notes
- The restrictions cover the following HS codes: 310210, 310290, 310311, 310319, 310390, 310420, 310430, 310490, 310520, 310530, 310540, 310551, 310559, 310560, and 310590. ↩
Añadir nuevo comentario