India’s Urea Output Falls Amid LNG Shocks from Iran Conflict

Indian urea manufacturers have cut production by 18% in February 2026, marking the steepest decline in over two years, as disruptions in Middle East shipping routes from Iran-related tensions curtail LNG deliveries. Natural gas, the primary feedstock for urea production, is now more expensive and less available, with spot LNG prices in Asia rising 27% month-on-month since January. This has forced state-owned entities like National Fertilizers Limited and Tata Chemicals to idle key production units, particularly in Gujarat and Uttar Pradesh. The reduction in urea output comes at a critical time for India’s agricultural sector, where farmers rely on subsidized urea ahead of the kharif sowing season. Domestic urea inventories have dropped to a 14-month low, falling to 1.8 million tons by early March, down from 2.5 million tons in December 2025. With global urea prices surging to $540 per ton—up from $380 in late 2024—Indian producers may face pressure to import more at a higher cost, straining the country’s trade balance. Marketwide, the energy-agriculture nexus is showing strain. Crude oil futures (CL=F) rose 4.3% in the week following the disruption, while natural gas (NG=F) prices in Europe and Asia spiked above $12/MMBtu. The VIX index climbed to 23.5, reflecting elevated volatility across commodity markets. Agricultural commodity traders are already factoring in higher fertilizer costs, with corn and soybean futures (ZC=F) up 6.8% and 5.1% respectively in March. The ripple effects are widening beyond India. Global fertilizer exporters like Russia and Saudi Arabia are seeing increased demand for their products, while import-dependent nations in Southeast Asia and Sub-Saharan Africa face potential supply delays. Indian government officials have signaled a review of emergency LNG procurement and possible adjustments to urea subsidies to mitigate downstream impacts.