Hormuz disruptions intensify fertilizer supply risks, nitrogen fertilizer prices may remain elevated in 2026
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Hormuz disruptions intensify fertilizer supply risks, nitrogen fertilizer prices may remain elevated in 2026
UBS's expert call believes that Middle East logistics disruptions are putting pressure on sulfur, urea, phosphate fertilizer, and ammonia supply, and the nitrogen fertilizer market may remain tight for longer, but fundamental support for stocks such as Nutrien and K+S remains limited.
- Sulfur is most affected by a closure of the Strait of Hormuz, with about 47% of global exports passing through the strait; around 8Mt of urea exports would be affected, equivalent to 29% of global exports and 8% of global demand.
- Experts believe there is not enough capacity in alternative export routes in the short term; even if the strait reopens, it could still take about 3 months for supply to return to normal levels.
- Supply is currently relatively sufficient on a seasonal basis in Northern Hemisphere regions such as Europe and the United States, but supply tightness could build due to Brazil in the second half, India, and other seasonal demand windows.
- Phosphate fertilizer risks come more from sulfur availability and cost than from Saudi phosphate fertilizer exports themselves; when phosphate fertilizer prices rise above $700-$750/t, demand destruction may increase significantly.
- UBS rates Yara, CF Industries, LXU, and Mosaic as Neutral, and K+S, Nutrien, and Intrepid Potash as Sell.
Report interpretation
Overview
This report is a fertilizer industry meeting note prepared by the UBS chemicals team based on an S&P Global expert call, focusing on the impact of the Middle East conflict and disruptions in the Strait of Hormuz on fertilizer trade flows, supply recovery, regional demand, and crop prices. The report covers nitrogen fertilizers, urea, sulfur, phosphates, ammonia, and potash, and lists the major fertilizer stock exposures in global chemical coverage.
Core views
The core view is that the longer the supply disruption persists, the greater the cumulative shock to the global fertilizer market, especially as nitrogen fertilizer prices in 2026 may remain higher relative to 2025. Short-term alternative logistics routes lack sufficient capacity, and supply will not recover immediately even after the strait reopens. UBS believes the related upside for Yara and CF Industries has largely been reflected in their share prices; it maintains Sell ratings on K+S and Nutrien because potash price support is limited and their share prices are already ahead of fundamentals.
Analysis framework
Through an expert call format, the report combines S&P Global's views on trade flows, export channels, regional import seasonality, the pace of supply recovery, and demand-destruction thresholds to assess fertilizer supply and demand and stock exposure. For stock valuation, UBS uses DCF, forward P/E, EV/EBITDA, and SOTP when necessary, together with organic sales growth, profitability, ROIC, and cash conversion to judge relative valuation premiums or discounts.
Methodology notes
Supply disruptions, alternative routes, seasonal application windows, and demand destruction
The report evaluates the impact of Strait of Hormuz disruptions on trade flows of key fertilizer products, assessing whether short-term alternative routes are feasible, how long supply recovery would take, and the amplifying effects of fertilization seasonal windows in different regions on demand and prices.
Relative valuation matched with fundamentals
UBS says it mainly combines DCF, forward P/E, or EV/EBITDA multiples, and uses SOTP where appropriate, while also considering organic growth, profitability, ROIC, and cash conversion.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Nutrien Ltd (NTR.N / NTR.US)Global fertilizer stock exposure, mainly involving potash and integrated fertilizer businesses
- Strengths
- The rising fertilizer price environment may provide some support to overall sector sentiment.
- Weaknesses
- UBS believes potash lacks significant supply disruption, price support is limited, and the share price is already ahead of fundamentals.
- Comparison
- Compared with Yara and CF Industries, which have higher nitrogen fertilizer exposure, Nutrien's potash thesis is weaker in this report.
- Risks
- Farmers prioritizing nitrogen fertilizer purchases may crowd out P and K demand, and potash demand destruction could occur.
- Yara (YAR.OL)Global fertilizer coverage stock with nitrogen fertilizer-related exposure
- Strengths
- Could benefit if the nitrogen fertilizer market remains tight for longer and prices rise.
- Weaknesses
- UBS believes the related upside has largely been reflected in the share price.
- Comparison
- Rated Neutral(CBE), stronger than Nutrien's Sell.
- Risks
- If trade flows recover in the coming months, the current elevated prices may prove unsustainable.
- CF Industries Holdings, Inc. (CFN)Global fertilizer coverage stock with nitrogen fertilizer-related exposure
- Strengths
- Upside risk to nitrogen fertilizer prices could provide potential support.
- Weaknesses
- UBS believes the market has already largely priced in the benefits of supply disruptions.
- Comparison
- Rated Neutral, higher than the Sell ratings on Nutrien and K+S.
- Risks
- Supply recovery or demand destruction may limit further price upside.
- Mosaic Co (MOS.N)Phosphate fertilizer and potash-related stock exposure
- Strengths
- Phosphate fertilizer prices may be supported by rising sulfur and ammonia costs.
- Weaknesses
- Phosphate fertilizer demand destruction may become evident in higher price ranges.
- Comparison
- Rated Neutral, higher than Nutrien's Sell.
- Risks
- Demand destruction in Brazil and the United States, as well as farmers delaying or reducing fertilization, may weigh on volumes.
- K+S (SDFGn.DE)Potash-related stock exposure
- Strengths
- Overall supply disruptions in the fertilizer sector may provide sentiment support.
- Weaknesses
- UBS believes potash price support is limited and the share price is ahead of fundamentals.
- Comparison
- Also rated Sell like Nutrien, with K+S marked Sell (CBE).
- Risks
- Potash is not facing significant supply disruptions, and demand may be affected as farmers prioritize spending on nitrogen fertilizers.
Key data
- Share of sulfur exports passing through the Strait of Hormuz47% of global exportsExperts said sulfur supply would be the most disrupted under a strait-closure scenario.
- Affected urea export volume8MtEquivalent to 29% of global urea exports and 8% of global demand.
- Share of affected phosphate fertilizer exports11% of global exportsPhosphate fertilizer export volumes can be offset by other regions, provided producers can obtain sulfur.
- Share of affected ammonia exports21% of global exportsCould push prices higher, but accounts for less than 3% of global demand.
- Supply recovery timeabout 3 monthsExperts' optimistic scenario is a return to normal about 3 months after the strait reopens, with greater downside risks.
- Traffic in the 1st month after the strait reopensabout 25%-30% of normalExperts expect trade flows in the first month to recover to only about one-quarter to 30% of normal levels.
- Traffic by the end of the 2nd month after the strait reopensabout two-thirds to three-quarters of normalExpected to recover to about 66%-75% of normal levels by the end of the second month.
- Europe's nitrogen fertilizer imports in 1Q 2026down 60% vs. the 2020-2025 averageImports had previously been brought forward to late 2025; Europe is relatively well covered for the current season, but may need products again starting in June-July.
- India's recent urea tenderabout 2.8Mt secured in 2.5Mt tenderThe tender attracted close to 6Mt of offers, with supply from the Baltic, Black Sea, and North Africa, among other regions.
- China's 2026 export potentialabout 6-7MtExperts expect China's urea exports to increase from last year's 4.8Mt, but restrictions will last at least through June.
- Phosphate fertilizer demand-destruction thresholdbecomes evident above $700-$750/t, with a significant decline above $1,000/tExperts believe demand destruction begins to emerge once phosphate fertilizer prices rise above this range.
- Nutrien latest listed priceUS$72.67Price date is April 21, 2026, with a 12-month rating of Sell.
Impact & implications
At the industry level, prolonged disruptions would keep the nitrogen fertilizer and sulfur chains tight and affect global fertilizer demand through phosphate fertilizer costs, farmers' purchasing order, and regional seasonal windows. At the equity level, rising nitrogen fertilizer prices benefit some producers, but UBS believes the upside for Yara and CF Industries has been fairly fully reflected; potash lacks significant supply disruption and demand may be crowded out by priority purchases of nitrogen fertilizers, creating pressure on Nutrien, K+S, and Intrepid Potash.
Risks
- Disruptions in the Strait of Hormuz last longer than expected, leading to accumulated tightness in sulfur, urea, phosphate fertilizer, and ammonia supply.
- Even if the strait reopens, urea plant restarts and vessel backlog clearance may make supply recovery slower than expected.
- Alternative export routes lack capacity and cannot replace Strait of Hormuz trade flows in the short term.
- High fertilizer prices may trigger demand destruction in regions such as Brazil and the United States, and affect planted area and yields.
- Phosphate fertilizer production faces risks from sulfur availability and rising costs.
- If trade flows recover in the coming months, current elevated fertilizer prices may be difficult to sustain.
What to watch
- Whether the Strait of Hormuz reopens and the monthly trade flow recovery ratio after reopening.
- Whether Europe increases nitrogen fertilizer purchases again after June-July.
- Brazil's third-quarter urea demand and whether it shifts from urea to ammonium sulfate.
- The final procurement volume in India's urea tender and whether awarded volumes are reduced.
- Whether China's 2026 urea exports rise to 6-7Mt, and when export restrictions are lifted.
- Whether phosphate fertilizer prices remain above $700-$750/t and trigger more visible demand destruction.
- Data in the coming months in the United States on planted area, fertilizer application rates, and yield impacts.