India and Bangladesh Halt Urea Production Amid LNG Supply Disruptions from Regional Conflict

Urea manufacturing plants across India and Bangladesh have been forced to halt production following a significant contraction in LNG deliveries from a neighboring region embroiled in armed conflict. The disruption, linked to the closure of key maritime trade routes and infrastructure damage, has curtailed natural gas flows critical to ammonia-based fertilizer production. In India, companies such as Fertilisers and Chemicals Travancore (FACT) and Rashtriya Chemicals & Fertilizers have idled over 40% of their urea capacity, amounting to approximately 1.8 million tons annually. Bangladesh’s state-owned Bangladesh Chemical Industries Corporation (BCIC) has similarly reduced output by 35%, affecting more than 800,000 tons of annual urea production. The decline in urea output follows a 60% reduction in LNG imports to the region since early February, as supply chains were disrupted by military actions near major export terminals. Natural gas remains the primary feedstock for nitrogen-based fertilizers, and the energy-intensive urea synthesis process is highly sensitive to feedstock availability. With domestic gas reserves at 70% utilization and no immediate alternative sources, producers have no viable option but to shut down. The resulting supply deficit is projected to increase domestic urea prices in India by 25% and in Bangladesh by 30% within the next quarter. Global fertilizer markets are already reacting: futures for urea on the Shanghai Futures Exchange have risen 18% since mid-February. This surge in input costs threatens to elevate food production expenses worldwide, particularly in countries reliant on imported fertilizers. Energy markets are also feeling the strain, with NYMEX crude oil (CL=F) and natural gas (NG=F) futures showing increased volatility as traders reassess regional energy security. The ripple effects extend to agricultural output and inflation. In India, where urea accounts for over 70% of nitrogen fertilizer use, reduced availability could lower crop yields by up to 15% in key wheat and rice-growing states. This risk is compounded by rising feedstock costs for agribusinesses, which may pass on higher expenses to consumers and further strain food inflation.