LNG supply shocks hit the fertilizer industry, forcing major Indian urea producers to cut production.

```

Indian fertilizer producers are facing direct impacts from the escalating situation in the Middle East. With Qatar’s liquefied natural gas (LNG) supply disrupted by conflict in the region, Indian urea manufacturers have started to cut production. If the situation persists, India may be forced to massively increase high-priced imports before the peak agricultural season, threatening the government’s fiscal consolidation plans.

According to media reports quoting informed sources, Indian Farmers Fertiliser Cooperative Ltd. and other producers have begun reducing output at some urea plants. The sources warn that if supply disruptions continue, relevant companies may be forced to shut down production facilities.

The supply shock has triggered ripple effects in the commodities market. Prices of raw materials for fertilizers such as ammonia and sulfur have risen simultaneously, further driving up production costs and intensifying concerns over spreading inflationary pressures. Meanwhile, Pakistan’s Sui Northern Gas Pipelines Ltd. has notified customers that it cannot supply regasified LNG to its fertilizer plants due to Middle East conflicts, with supply halts effective from midnight Wednesday. According to a company notice seen by Bloomberg, most of Pakistan’s required LNG comes from Qatar.

Production cuts have started, shutdown risks rising

LNG is a core raw material for urea production, serving both as an energy source and a key input for this globally most widely used fertilizer. The disruption of supplies from Qatar directly cuts off raw materials to Indian fertilizer plants, leading some facilities to begin reducing output.

Sources say that if disruptions last longer, companies may further shut down facilities, though no specific details were provided. Suresh Kumar Chaudhari, Director General of the Indian Fertiliser Association, said current stock levels are sufficient to meet short-term needs and expressed optimism about the situation. "We are very optimistic that the war may end soon," he said in a media interview Tuesday. "If the war continues, that is where our concern lies."

A senior official from India’s Ministry of Fertilizer said the geopolitical situation is being continuously monitored and there is currently no shortage of gas supply, but did not comment on the urea production cuts.

Agricultural peak season approaches, import pressure surges

If production cuts persist, India will face pressure to expand imports before demand peaks. India is the world’s largest rice grower and exporter, and the world’s second-largest producer of sugar, wheat and cotton, with seasonal fertilizer demand peaking at the start of the monsoon season in June each year.

High-priced fertilizer imports will directly impact the Indian government’s fiscal goals. New Delhi is working to reduce spending on fertilizer subsidies for farmers, aiming to shrink the budget deficit as a percentage of GDP from the 4.4% target for fiscal year 2025-26 to 4.3% in the following year. If import costs rise sharply, this deficit-reduction track will face obvious disruptions, and planned subsidy cuts in the annual budget may be hindered as a result.

Risk Warning and DisclaimerThe market has risks, and investment should be cautious. This article does not constitute personal investment advice, nor does it take into account the specific investment goals, financial situation or needs of individual users. Users should consider whether any opinions, views or conclusions in this article are suitable for their own situations. Investments based on this article are at your own risk. ```