Another product has experienced a price increase.

The Strait of Hormuz is experiencing strong winds, sending a chill through the fertilizer industry.

On March 9, the Chicago Mercantile Exchange’s main contract for urea was priced at $584.5 per ton, a 25% increase from February 28. On the same day, domestic spot sulfur prices rose to 4,550 yuan per ton, up 17% compared to before the escalation of conflicts.

Frequent sharp rises and falls greatly impact the stability of fertilizer supply. Initially caused by raw material issues, then transportation problems, followed by profit margins, and ultimately, the most critical food security concerns.

The Strait of Hormuz accounts for about one-third of global fertilizer trade. Urea exports from the Gulf region make up 45% to 49% of global trade, sulfur accounts for 45% to 50%, and phosphate fertilizers 20% to 30%. If the passage is blocked, procurement rhythms, inventory arrangements, and pricing strategies for companies will be completely disrupted.

The International Fertilizer Association and Fertilizer Research Institute estimate that if this route remains blocked long-term, the global annual fertilizer supply gap could reach 50 to 60 million tons. This is especially concerning as it coincides with the spring planting season in the Northern Hemisphere, when the industry fears supply shortages and timing issues simultaneously.

This is a rarely noticed characteristic of the fertilizer industry: price sensitivity is not only driven by demand but more so by supply chain continuity. Spring planting won’t stop because of price changes, but the industry chain will fall into hesitation and delay.

1. An Unexpected “Danger” Wind Blows

Capacity constraints often pose less of a threat than raw materials, which is a characteristic of the chemical industry.

China is the world’s largest producer and consumer of fertilizers, with annual consumption around 50 million tons of pure nutrient content, accounting for about 30% of global demand. From the finished product perspective, China has strong self-sufficiency in nitrogen and phosphate fertilizers, with some varieties even being net exporters. However, from the raw material side, structural weaknesses persist.

Specifically, dependence on potassium fertilizers remains above 50%, requiring over 10 million tons of potash imports annually. Sulfur dependence is similarly over 50%, and China is the world’s largest sulfur importer.

By 2025, approximately 56% of China’s sulfur imports will come from the Middle East. Although the phosphate fertilizer industry is based on domestic phosphate rock, converting phosphate rock into marketable monoammonium phosphate (MAP) and diammonium phosphate (DAP) requires sulfuric acid, which in turn depends on sulfur supply.

This explains why disruptions in the Strait can quickly impact the domestic market. Fertilizers are not single products but involve interconnected chains of nitrogen, phosphorus, and potassium. Urea depends on natural gas and coal; phosphate fertilizers depend on phosphate rock and sulfur; potassium fertilizers depend on global resource patterns. When one link tightens, compound fertilizer companies will consider costs. Since raw material costs usually account for over 80% of total fertilizer costs, these companies have little buffer.

From 2020 to the first half of 2023, prices of upstream raw materials like single nutrients, ammonia, sulfur, and sulfuric acid fluctuated significantly, directly impacting production and sales of compound fertilizers. Rapid raw material price increases outpaced fertilizer prices, squeezing profits; when raw material prices fell sharply, distributors hesitated, disrupting sales rhythms. By the second half of 2023, raw material prices stabilized, and the industry gradually returned to normal, with leading companies seeing sales recoveries and profit margins improve.

The current sensitivity to Middle East disturbances is not only due to rising prices but also because it reminds the market that the safety margin in the fertilizer industry lies not in finished product output but in raw material redundancy. A large-scale compound fertilizer producer without integrated upstream resources—such as ammonia, sulfuric acid, or phosphate rock—will still be passively affected by raw material shocks.

2. Differentiation and Insights: What Should the Fertilizer Industry Watch?

On the surface, the compound fertilizer industry is a large market, but in reality, it is highly fragmented and seasonal.

By November 2025, China’s effective compound fertilizer capacity will reach 134.14 million tons, but from January to November, actual production totaled only 47.77 million tons, with an annualized operating rate of just 38.8%. This indicates that the industry is never short of nominal capacity; what is truly scarce is the ability to maintain stable operation and delivery.

Most compound fertilizer companies adopt a sales-driven production model. They produce popular products during the off-season and schedule production based on orders during peak season. Due to limited sales radius and regional demand differences, companies often operate multiple bases in resource-rich and sales areas, forming a multi-site operation.

This model reduces transportation costs during stable periods but amplifies management differences during volatility. Inventory turnover, raw material price locking, channel control, and regional allocation directly impact current profits.

According to data from Kaiyuan Chemical and other agencies, the top 5 domestic fertilizer companies account for only 11.5% of effective capacity (CR5), and the top 10 for just 18.6% (CR10). Among 105 companies, only 7 have annual capacities of 2 million tons or more.

This dispersed pattern means most companies lack bargaining power when raw material prices rise and lack channel capacity to absorb price declines. Only leading firms with integrated supply chains, branding, and channel advantages—such as Yuntianhua—can withstand fluctuations. Besides these top players, many other industry chain participants are quite capable.

For example, XinYangFeng, a leading domestic phosphate compound fertilizer producer, in 2024 will have capacities of 7.98 million tons of compound fertilizer, 1.85 million tons of MAP, 150,000 tons of water-soluble fertilizer, 300,000 tons of slag acid fertilizer, and 50,000 tons of iron phosphate, with supporting facilities of 4.12 million tons of sulfuric acid and 300,000 tons of ammonia.

XinYangFeng has achieved self-sufficiency in ammonia for three phosphate fertilizer bases in Hubei, with MAP meeting internal needs and some being exported. Regarding phosphate rock, by the end of 2024, the company owns mining rights for 2.431 billion tons of resources, with an existing capacity of 900,000 tons of phosphate ore and a 1.8 million-ton annual mining project under construction, which is expected to boost self-sufficiency to over 30%.

In the first three quarters of 2025, XinYangFeng reported revenue of 13.47 billion yuan, up 9%, with net profit attributable to shareholders of 1.37 billion yuan, up 23.4%. Conventional and new-type compound fertilizers and phosphate fertilizers contributed 44%, 27%, and 23% of revenue, respectively, with new-type and phosphate fertilizers generating higher gross margins.

Compared to XinYangFeng, Yuntianhua emphasizes extending the industry chain. It has integrated phosphate mining, wet-process phosphoric acid, refined phosphoric acid, industrial-grade MAP, iron phosphate, and compound fertilizers, mainly utilizing phosphoric acid fractionation technology.

In simple terms, the same phosphate resource can be allocated to different product categories with varying profit margins. In 2024, Yuntianhua’s phosphate compound fertilizer business accounted for 56% of revenue but contributed 74% of gross profit. In the first three quarters of 2025, revenue reached 15.87 billion yuan, with net profit of 670 million yuan. Although its gross and net profit margins are lower than XinYangFeng’s in absolute terms, it has a differentiated overseas expansion strategy.

Compared to these two, the more well-known “old brand” Stanley has extended into upstream phosphate chemicals in recent years, with projects in Chengde, Hebei, and Songzi, Hubei, now operational, beginning to achieve partial self-supply of phosphate raw materials. Its sales mainly adopt a prepayment model, with minimal receivables.

In the first three quarters of 2025, Stanley reported revenue of 9.29 billion yuan, up 17.9%, with net profit of 820 million yuan, up 22.7%. Chlorine-based compound fertilizers remain the main revenue source, but profitability is higher in new fertilizers and phosphate products, with sulfur-based compounds increasing.

3. The Industry Enters the “Refinement” Era

China’s applied pure nutrient amount of compound fertilizers increased from 9.18 million tons in 2000 to 24.01 million tons in 2023, with an average annual growth rate of 4.3%, far exceeding the growth rate of total chemical fertilizer use. During the same period, the fertilizer compound rate increased from 22.1% to 47.8%. This indicates that demand has not disappeared but shifted from single nutrients to compound fertilizers and from general-purpose to specialized products.

Data shows the global average compound fertilizer rate is about 50%, with developed countries reaching 70-80%. China still has room for improvement.

Moreover, the area of high-efficiency fertilizers applied in 2023 was only 18.7%. This suggests the industry upgrade is far from complete. Controlled-release fertilizers, water-soluble fertilizers, organic-inorganic blended fertilizers, bio-fertilizers, and crop-specific fertilizers are still in the penetration stage. Traditional fertilizers still dominate, but products that can improve margins and customer loyalty—such as high-efficiency, specialized, functional, and precision fertilizers—are gaining ground.

This shift is driven by increased agricultural scale and higher quality requirements for fertilizers, prompting companies to move from selling standard products to providing solutions—similar to product portfolios in the internet industry.

Last year, an incident occurred where a contractor distributed fertilizer materials to farmers for chili planting, but due to a suspected misapplication of fertilizer type, thousands of acres of chili crops were lost. This illustrates that in modern agriculture, the role of fertilizer has evolved.

From a capital market perspective, this transformation also changes valuation logic. Fertilizer stocks are gradually shifting from cyclical commodities to companies emphasizing strong channels and weaker manufacturing, or resource-based integrated processing firms. Therefore, price increases are only superficial; ultimately, the industry is competing on supply chain strength—phosphate rock, sulfuric acid, ammonia, MAP… Investors are already calculating with full awareness.

For these companies, product upgrading remains crucial. Conventional fertilizers still form the basis of scale, but new fertilizers determine profit centers. As a highly seasonal business, inventory and receivables directly influence a company’s resilience during high volatility periods. Supply chain, product innovation, and channels will decide their performance.

Finally, future fertilizer companies will need to monitor not only domestic spring and autumn planting but also demand shifts in Southeast Asia, South America, and India, as international supply and demand increasingly influence domestic prices. The next cycle has already begun, and transformation is imminent.