West Asia Crisis Putting Pressure On India’s Fertiliser Output: Morgan Stanley

New Delhi, Mar 16 (KNN) Fertiliser production in India is beginning to feel the impact of the ongoing West Asia crisis which has disrupted key energy supply routes and affected industrial supply chains, according to a report by Morgan Stanley.

The report said disruptions around the Strait of Hormuz and constraints in crude oil and natural gas flows are affecting feedstock availability and industrial operations across sectors such as fertilisers, chemicals and petrochemicals.

Energy Supply Disruptions

"Asia imports about a quarter of its energy needs in the form of crude oil, LNG, and propane. The Middle East is also a major fertiliser producer and trade hub, and Asia relies on it for ~14 per cent of its fertiliser needs," ANI quoted Morgan Stanley report.

The report noted that the disruption of the Strait of Hormuz is testing the resilience of Asia’s energy-linked value chains.

Impact on Fertiliser and Chemical Production

The report estimates that about 25 million tonnes per annum of petrochemical capacity across Asia is facing varying degrees of curtailment, while around 10 million tonnes of fertiliser capacity has been affected in countries including South Korea, Taiwan, Thailand and India.

The report noted, "The disruption in crude and natural gas flows has affected key petrochemical and fertiliser feedstocks like propane and naphtha." 

Shortages of key petrochemical feedstocks such as propane and naphtha have forced several companies to reduce operating rates or shut units, it added.

Fertiliser production of about 10 million tonnes in India and Bangladesh has been impacted by limited feedstock supplies, with India exploring alternative sources for urea.

Global Nitrogen Output and Price Impact

Globally, nitrogen fertiliser production is also facing constraints, with several plants reducing operations. Morgan Stanley estimates that the disruptions could affect over 5.5 million tonnes of effective urea output annually, equivalent to around 4 per cent of global supply.

Supply tightness has also pushed up downstream petrochemical prices, with polymer and intermediate product prices rising 15–25 per cent over the past two weeks.

The report warned, "If the situation extends... economies will start looking for alternative fuels for power generation like coal... or curb consumption in the industrial sector." 

(KNN Bureau)