China restricts fertilizer exports, further crimping war-tightened supply

China is clamping down on fertilizer exports to protect its domestic market, a number of industry sources said, putting an additional strain on global markets that were already grappling with shortages caused by the U.S.-Israeli war on Iran.

China is among the largest fertilizer exporters – shipping more than $13 billion (C$17.8 billion) worth of it last year – and it has a history of controlling exports to keep prices low for farmers.

Shipments through the war-blocked Strait of Hormuz account for roughly one-third of the sea-borne supply. In mid-March, Beijing banned exports of nitrogen-potassium fertilizer blends and certain phosphate varieties, sources told Reuters.

WHY IT MATTERS: International urea prices have risen by around 40 per cent from pre-war levels as the closure of the Strait of Hormuz blocks roughly one third of the supply and contributes to higher production costs.

The ban, which has not been formally unveiled, was reported earlier this week by Bloomberg News.

Added to existing bans and export quotas for urea, only a handful of fertilizers – notably ammonium sulphate – can be exported, five sources said. That would mean between half and three quarters of China’s exports last year are restricted, potentially up to 40 million metric tons, according to a Reuters estimate.

“This pattern is consistent: China restricts supplies rather than coming to the rescue during global tightness,” said Matthew Biggin, a senior commodities analyst at BMI.

“The export restrictions exist because of their tight domestic balance – they’re prioritising food security and insulating their domestic market from price shocks.”

Beijing’s curbs, like its move last week to ban refined fuel exports, come as governments limit exports of products whose inputs have been threatened by disruption from the war, worsening shortages and higher prices around the world.

International urea prices have risen by around 40 per cent from pre-war levels. In China, urea futures are near a 10-month high.

Dependent on China

Last year, China sent Brazil, Indonesia and Thailand roughly a fifth of their fertilizer imports and that figure stood at a third for Malaysia and New Zealand, according to International Trade Centre data. For India, it was around 16 per cent, according to its trade data.

Between half and 80 per cent of those exports are now restricted, according to a Reuters analysis of Chinese customs data.

“Buyers were hoping China would step in and fill the supply gap, but this decision will only tighten supplies further,” a New Delhi-based fertilizer company official said, in reference to the recent restrictions.

The company official declined to be named due to the sensitivity of the matter.

India, which imported more than 40 per cent of its urea, a nitrogen-based fertilizer, and DAP, a blend, from the Middle East last year, has requested China issue export quotas for urea.

When will exports resume?

The Philippines on Wednesday said China had assured it that fertilizer exports would not be restricted.

Asked about the comments a day later, China’s Ministry of Foreign Affairs spokesperson referred the question to other departments.

China’s General Administration of Customs, National Development and Reform Commission and Ministry of Commerce did not immediately respond to requests for comment.

At a fertilizer conference in Shanghai attended by Reuters on Wednesday, five salespeople said they did not expect the fertilizer bans to be lifted before August, after China’s peak June-to-August export period.

Producers are watching for signals from the government after spring planting to see whether bans would be extended.

In December, the state-linked fertilizer association urged major producers to suspend exports of phosphate fertilizers until August.

“Most folks who follow this very, very closely are expecting them to continue to extend the export bans,” said Caitlin Welsh, a director at the Center for Strategic and International Studies.

“China is so reluctant to do anything that would increase the price of grains, especially animal feed, domestically.”