Hormuz risk spreads: It's not just oil that's affected, but also AI chips, fertilizers, and aluminum!

The tensions in the Strait of Hormuz are spreading from the energy market to the broader supply chains of commodities. In addition to crude oil and natural gas, the supply of key industrial raw materials such as fertilizers, sulfur, aluminum, and helium is also facing disruptions, with the impacts extending from global agriculture to industries including semiconductors, automotive, and aerospace.

According to a Bloomberg report on July 14, the Middle East is not only a critical energy export region but also a core supplier of strategic raw materials like fertilizers, sulfur, aluminum, and helium, with the Strait of Hormuz serving as an important channel for these commodities to enter international markets. As regional tensions rise again, shipping firms are increasing their risk management efforts, and the flow of some goods has already been noticeably affected.

Market prices have started to reflect supply concerns. For the week ending July 10, New Orleans urea prices, a key global benchmark, rose 6.2%, the largest weekly gain in over three months; spot helium prices, according to industry insiders, have at least doubled since March; and although aluminum ingot processing fees declined briefly after the ceasefire in June, they remain significantly higher than pre-conflict levels.

Pressure on Fertilizer Supply Raises Food Cost Risks

The Persian Gulf region is home to major global fertilizer producers, including Qatar Fertilizer Company, Fertiglobe Plc, and Saudi Basic Industries Corporation, with their products highly dependent on exports through the Strait of Hormuz to international markets.

This round of escalating tensions is impacting the fertilizer industry chain from both supply and demand sides. On one hand, the energy infrastructure crucial for ammonia and urea production faces potential risks; on the other hand, disruptions in export shipping have weakened global supply capacity. Unlike previous incidents where some ships were stranded at sea as floating storage, more shipping companies now choose to reroute or even suspend transportation, further transmitting supply risks to the production side.

As Southern Hemisphere agriculture enters its stocking phase, major importing countries are facing increased procurement pressure. During the last regional conflict, India, the world’s largest urea importer, purchased urea at prices nearly double the pre-war rate. Analysts believe that if fertilizer supply remains constrained, it will further reduce crop yields and, amid frequent extreme weather, push up global food costs.

Tightening Sulfur Supply: Agricultural and Mining Sectors Compete for Resources

The Middle East is also a major global sulfur supply center. Sulfur is a key raw material for phosphate fertilizer production, and previous supply shortages have forced some fertilizer producers in Brazil, the US, and Morocco to cut output. At the same time, sulfur and its derivatives such as sulfuric acid are essential for smelting metals like copper and nickel. Price increases are pushing agricultural and mining companies to compete for limited supplies, intensifying downstream cost pressures.

Maria Mosquera, sulfur product editor at Argus Media, said recent shipments from the Middle East to India temporarily eased supply pressures, but since last week, cargo flows through the Strait of Hormuz have stalled again, and supply risks have resurfaced.

The Middle East accounts for nearly one tenth of global primary aluminum production and has even greater importance in high-value-added specialized aluminum products, which are extensively used in automotive, construction, and aerospace industries.

Although increased output in other regions and alternative logistics solutions have eased pressure on general aluminum products supply to some extent, the specialized aluminum market remains tight. Industry insiders expect that even if producers can redirect exports through other ports, increased transport distances and reduced logistics efficiency will still push up costs, keeping aluminum ingot processing fees at high levels.

Helium Shortage Spreads to AI Chip Manufacturing

The Ras Laffan Industrial Zone in Qatar not only hosts the world's largest liquefied natural gas export facility, but before the escalation, also supplied about one-third of global helium.

Although helium is broadly used in medical equipment and automotive safety systems, its strategic value is mainly in semiconductor manufacturing. Thanks to its exceptional cooling and protection capabilities for silicon wafers, helium is an essential industrial gas for advanced chip production, and currently lacks mature alternatives.

As supply tightens, chip manufacturers are accelerating their search for substitute sources and alleviating short-term shocks by consuming inventory.

Since helium is not traded on open markets, price transparency is limited. Helium market consultant Phil Kornbluth, with over 40 years of industry experience, said since March, spot helium prices have risen at least 100%, and there is currently a "clear supply shortage" in the market.

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