The winds are rising in the Strait of Hormuz, bringing a chill to the fertilizer industry.
On March 9, the main contract for urea at the Chicago Mercantile Exchange was reported at $584.5 per ton, an increase of 25% compared to February 28. On the same day, domestic spot prices for sulfur rose to 4,550 yuan per ton, up 17% from before the escalation of the conflict.
Frequent sharp rises and falls significantly impact the stability of fertilizer supply. It starts with raw material issues, then transportation problems, followed by corporate profit concerns, and ultimately, the most critical issue: food security.
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The Strait of Hormuz accounts for about one-third of global fertilizer trade. Urea exports from the Gulf region account for 45% to 49% of global trade volume, sulfur for 45% to 50%, and phosphate fertilizers for 20% to 30%. Once the passage is obstructed, the procurement rhythm, inventory arrangements, and pricing logic of companies will be thrown into chaos.
The International Fertilizer Association and the Fertilizer Institute estimate that if this passage remains blocked for an extended period, the global annual fertilizer supply gap could reach 50 to 60 million tons. Coincidentally, this is the time around spring plowing in the Northern Hemisphere, when the fertilizer industry is most fearful of supply and timing becoming tight simultaneously.
This is actually a characteristic of the fertilizer industry that is rarely noticed by the outside world; price sensitivity arises not only from demand but more from the continuity of the supply chain. Spring plowing will not stop because of prices, but the industrial chain will fall into hesitation and delay.
1. A Sudden &#34;Crisis&#34; Wind
Threats from production capacity are often not as significant as those from raw materials, which is a characteristic of the chemical industry.
China is the world's largest producer and consumer of fertilizers, with annual consumption stable at around 50 million tons of pure equivalent, accounting for about 30% of global consumption. From the finished product perspective, China has a strong self-sufficiency capability in nitrogen and phosphate fertilizers, with some varieties even capable of net exports. However, from the raw material perspective, structural shortcomings always exist.
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Specifically, the dependence on imports for potash fertilizers has long remained above 50%, requiring more than 10 million tons of potassium chloride to be imported each year. The dependence on imports for sulfur also remains above 50%, with China being the largest importer of sulfur globally.
By 2025, about 56% of China's sulfur imports will come from the Middle East. Although the phosphate fertilizer industry chain is built on domestic phosphate rock, the conversion of phosphate rock into marketable monoammonium phosphate and diammonium phosphate requires the intermediate step of sulfuric acid, which in turn relies on sulfur supply.
This is why disruptions in the Strait can quickly transmit to the domestic market. Fertilizers are not a single product but are interconnected chains of nitrogen, phosphorus, and potassium. Urea relies on natural gas and coal, phosphate fertilizers depend on phosphate rock and sulfur, and potash fertilizers are influenced by the global resource landscape. When any link tightens, compound fertilizer companies will consider costs. Since raw material costs typically account for over 80% of the total cost of compound fertilizers, these companies do not have much buffer space
From 2020 to the first half of 2023, the prices of upstream single nutrient fertilizers, synthetic ammonia, sulfur, sulfuric acid, and other materials fluctuated significantly, directly impacting the production and sales of compound fertilizer companies. When raw material prices rise too quickly, compound fertilizer prices cannot keep up, leading to compressed profits; when raw material prices fall too quickly, distributors tend to hesitate, disrupting the sales rhythm of companies. By the second half of 2023, as raw material price fluctuations eased, the industry gradually returned to normal, with leading companies beginning to see a rebound in sales and profit recovery.
The current round of disturbances in the Middle East is sensitive not only because of rising prices but also because it reminds the market that the safety boundary of the fertilizer industry lies not in finished product output but in the redundancy of raw materials. A company with large-scale compound fertilizer production capacity will still be passively pressured by raw material shocks if upstream resources, synthetic ammonia, sulfuric acid, and phosphate rock are not adequately matched.
II. Differentiation and Insights: What Should the Fertilizer Industry Focus On?
On the surface, the compound fertilizer industry appears to be a large market, but it is actually highly fragmented and exhibits strong seasonality.
As of November 2025, the effective production capacity of domestic compound fertilizers reached 13.414 million tons, but the total output from January to November was only 4.777 million tons, resulting in an annualized operating rate of only 38.8%. This indicates that the industry has never lacked nominal capacity; what is truly scarce is the ability to maintain stable operations and deliveries.
Compound fertilizer companies often adopt a production model based on sales. They produce popular varieties during the off-season and schedule production according to orders during the peak season. Due to limited sales radius and significant regional demand differences, companies often establish multiple operational bases in resource locations and sales areas.
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This model can reduce transportation costs during stable periods but can amplify management differences during volatile times. Inventory turnover, raw material price locking, channel control, and regional allocation all directly affect current profits.
According to statistics from institutions such as Kaiyuan Chemical, the effective capacity share of the top five domestic fertilizer companies (CR5) is 11.5%, and the top ten (CR10) is only 18.6%. Among 105 companies, only 7 have an annual production capacity of 2 million tons or more.
The fragmented structure means that most companies lack bargaining power when raw material prices rise and lack the ability to digest channels when prices fall. Those that can navigate through volatility are usually leading companies that possess advantages in the industrial chain, integration, brand, and channels. Companies like Yuntianhua, known as &#34;cycle kings,&#34; fall into this category. Besides the top leaders, there are also many strong players in the fertilizer industry.
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Taking the domestic phosphate compound fertilizer leader Xinyangfeng as an example, it has a capacity of 7.98 million tons of compound fertilizer, 1.85 million tons of monoammonium phosphate, 150,000 tons of water-soluble fertilizer, 300,000 tons of slag acid fertilizer, and 50,000 tons of iron phosphate in 2024, supported by 4.12 million tons of sulfuric acid and 300,000 tons of synthetic ammonia
Xinyangfeng has achieved self-sufficiency in ammonia supply at its three phosphate fertilizer bases in Hubei, with monoammonium phosphate meeting internal demand and also partially being exported. In terms of phosphate rock, by the end of 2024, the company will have mining rights with a resource reserve of 2.431 billion tons, an existing mining capacity of 900,000 tons of phosphate rock, and an additional 1.8 million tons per year mining project under construction, which is expected to increase the self-sufficiency rate of phosphate rock to over 30% after production starts.
In the first three quarters of 2025, Xinyangfeng's revenue reached 13.47 billion yuan, a year-on-year increase of 9%, with a net profit attributable to the parent company of 1.37 billion yuan, up 23.4% year-on-year. Conventional compound fertilizers, new-type compound fertilizers, and phosphate fertilizers contributed 44%, 27%, and 23% to revenue, respectively, with new-type compound fertilizers and phosphate fertilizers contributing a higher proportion of gross profit.
Compared to Xinyangfeng, Yuntu Holdings emphasizes the extension of the industrial chain. The latter has established a full chain from phosphate rock to wet-process phosphoric acid, refined phosphoric acid, industrial-grade monoammonium phosphate, iron phosphate, and phosphate compound fertilizers, with the core being the graded utilization technology of phosphoric acid.
In simple terms, Yuntu can categorize the same phosphate resource into different types and products with varying profit margins. In 2024, Yuntu's phosphate compound fertilizer business accounted for 56% of revenue, but 74% of gross profit. In the first three quarters of 2025, its revenue reached 15.87 billion yuan, with a net profit attributable to the parent company of 670 million yuan. Although its gross margin and net margin are lower than those of Xinyangfeng, it has differentiated itself in overseas expansion.
In comparison to these two companies, the more well-known &#34;old brand&#34; Stanley has extended into upstream phosphate chemicals in recent years, with projects laid out in Chengde, Hebei, and Songzi, Hubei, which are now in use, beginning to achieve partial self-sufficiency in phosphate fertilizer raw materials. Its sales generally adopt a model of receiving payment before shipment, resulting in a very small accounts receivable scale.
In the first three quarters of 2025, Stanley's revenue was 9.29 billion yuan, a year-on-year increase of 17.9%, with a net profit attributable to the parent company of 820 million yuan, up 22.7% year-on-year. Chlorine-based compound fertilizers remain the main source of income, but the profitability of new fertilizers and phosphate fertilizer businesses is stronger, and the proportion of sulfur-based compound fertilizers is also increasing.
III. The Industry Enters the &#34;Purification&#34; Era
The application of compound fertilizers in China has grown from 9.18 million tons in 2000 to 24.01 million tons in 2023, with an average annual compound growth rate of 4.3%, far exceeding the growth rate of total agricultural fertilizers. During the same period, the compound fertilizer rate increased from 22.1% to 47.8%. This indicates that industry demand has not disappeared but has shifted from single nutrient fertilizers to compound fertilizers, and from general fertilizers to specialized fertilizers.
Data shows that the international average compound fertilizer rate is about 50%, with developed countries at 70% to 80%, indicating that China still has room for improvement.
Moreover, the proportion of new efficient fertilizers in application area was only 18.7% in 2023. This indicates that the industry upgrade is far from complete. Slow-release fertilizers, water-soluble fertilizers, organic-inorganic compound fertilizers, biological fertilizers, and crop-specific fertilizers are still in the penetration stage. Traditional fertilizers still dominate, but those that can truly enhance gross profit and customer stickiness have shifted towards efficient, specialized, functional, and precise products
The reason is that as the scale of agriculture increases, the quality requirements for fertilizers have also risen. Fertilizer companies are gradually shifting from selling standard products to selling solutions—similar to product combinations in the internet industry.
Last year, there was an incident in a certain area where a contractor provided fertilizers to farmers for growing peppers, but it was suspected that the wrong type of fertilizer was issued, resulting in the complete loss of thousands of acres of peppers. This shows that the role of fertilizers in current agricultural production has changed.
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From the perspective of the capital market, this transformation has also brought about a change: the valuation logic of fertilizer stocks is gradually transitioning from cyclical products to strong channels combined with weak manufacturing, or integrated companies of resources and processing. Therefore, the price increase is just a surface phenomenon; ultimately, fertilizers are also starting to compete on supply chain strength—phosphate rock, sulfuric acid, synthetic ammonia, monoammonium phosphate... Institutions and investors have long been pressing their calculators to the point of smoking.
For these companies, product upgrades are also a significant matter. Conventional compound fertilizers remain the foundation of scale, but new fertilizers determine the profit center. Fertilizers are a highly seasonal business, and inventory and cash collection capabilities directly determine whether companies can navigate high volatility periods with ease. The performance in these aspects will be determined by the supply chain, products, and channels.
In the end, future fertilizer companies will not only need to pay attention to domestic spring plowing and autumn planting but also to changes in demand areas such as Southeast Asia, South America, and India, as international supply and demand increasingly influence domestic pricing. The next cycle has already begun, and transformation is about to occur

The situation in the Strait of Hormuz is affecting the fertilizer industry, with significant increases in the prices of urea and sulfur. On March 9, the price of urea on the Chicago Mercantile Exchange rose to $584.5 per ton, while the domestic spot price of sulfur reached 4,550 yuan per ton. The global fertilizer supply chain is under pressure, and if the passage remains blocked for an extended period, the global annual fertilizer supply gap could reach 50 to 60 million tons. As the largest fertilizer producer, China faces issues of raw material dependency, particularly with high reliance on imports of potash and sulfur. The tight supply of fertilizers before the spring plowing season may impact agricultural production

Another price-increasing variety has emerged