Vertiglobe, regarded as one of the largest fertilizer companies worldwide, has initiated the use of a fleet of trucks to transport its products to ports outside the Hormuz Strait. The company's CEO, Ahmed Alhoshi, described this step as an "extraordinary solution" to ensure the flow of global supplies amidst ongoing disruptions in this vital maritime corridor.
Typically, goods are shipped from the UAE through the Hormuz Strait via vessels carrying between 30,000 to 50,000 tons of fertilizers. However, the trucks, which transport only 20 to 25 tons each, necessitate a large fleet to cover the long distances across the desert before being loaded onto ships.
Details of the Shift
This transition has significantly complicated operations and increased the costs and resources required. Alhoshi confirmed that the company has managed to meet most of its commitments so far, despite the challenges. Vertiglobe, which is government-backed, is a subsidiary of the Abu Dhabi National Oil Company (ADNOC) and supplies over 45 countries across the Americas, Europe, Asia, and the Pacific, including major markets like India, Bangladesh, and Australia.
In some instances, the company has redirected shipments from distant regions such as Africa to meet demand. Alhoshi stated, "We have managed to fulfill almost all our customers' requests, although it has been a challenge in some cases." He emphasized that the focus remains on ensuring fertilizers reach the locations in time for the planting season.
Background & Context
Before the war in Iran began on February 28, the Hormuz Strait carried about one-fifth of global oil supplies and approximately one-third of maritime fertilizer trade. The actual closures of this corridor have led to a sharp rise in commodity prices. Reports indicate that the price of urea, the most widely used nitrogen fertilizer in the world, has surged by 60%, with overall fertilizer prices expected to increase by 31% this year.
Vertiglobe warns of an impending fertilizer supply crisis, as the direct and indirect effects on the global supply chain are escalating. Fertilizer production heavily relies on energy, meaning that restrictions on oil and gas flow have forced some fertilizer plants in the Gulf and beyond to reduce production or shut down.
Impact & Consequences
Analyses indicate that there are signs of pressure in the agricultural sector, as some farmers have started to shift away from crops that require large amounts of fertilizers, such as corn and wheat, which could exacerbate supply shortages and increase food prices. Replacing fertilizers significantly remains difficult, putting crops at risk of decline and increasing inflationary pressures.
The Food and Agriculture Organization has warned that ongoing disruptions could push an additional 45 million people into severe food insecurity this year. Alhoshi confirmed that about half of the world's population, totaling 8 billion, relies on nitrogen fertilizers like urea to meet their food needs.
Regional Significance
These developments are particularly significant for Arab countries, many of which rely on importing fertilizers to meet their agricultural needs. As disruptions in the Hormuz Strait continue, the region may face substantial challenges in securing fertilizer supplies, impacting agricultural production and food prices.
In conclusion, if the closure of the Hormuz Strait persists, the consequences could become more severe, with fertilizers failing to reach farms before key planting seasons. Alhoshi hopes that weather conditions will support good harvests and that he can find greener corridors for more efficient and cost-effective fertilizer transportation.