West Asia Crisis Disrupts Fertiliser and Petrochemical Supply Chains, India Faces Production Curbs: Morgan Stanley
The West Asia crisis is severely disrupting fertiliser and petrochemical supply chains across Asia, particularly impacting India, according to Morgan Stanley. Disruptions in the Strait of Hormuz and limited crude/natural gas flows are causing feedstock shortages, leading to production curtailments in petrochemicals and fertilisers across the region. India and Bangladesh alone have seen 10mnt of fertiliser capacity affected, with downstream product prices rising significantly. The crisis tests Asia's reliance on West Asia for vital energy and fertiliser supplies.
The ongoing West Asia crisis is significantly impacting critical fertiliser and petrochemical supply chains across Asia, leading to production curbs in several countries, including India. A Morgan Stanley report highlights that disruptions in the Strait of Hormuz and constraints on crude oil and natural gas flows are causing severe shortages of essential feedstocks like propane and naphtha. This has forced companies to reduce operating rates or entirely shut down units.Asia's high dependence on West Asia for approximately a quarter of its energy needs and 14% of its fertiliser requirements makes the region particularly vulnerable to these disruptions. The report notes that about 25 million tonnes per annum (mntpa) of petrochemical capacities and roughly 10 million tonnes (mnt) of fertiliser capacity have been impacted across Asia, with countries like South Korea, Taiwan, Thailand, and India specifically cited. In India and Bangladesh alone, 10 mnt of fertiliser production has been affected, prompting India to seek alternative urea sources. Globally, nitrogen fertiliser production has also seen curtailments, equivalent to over 5.5 million tonnes (4%) of annual effective urea. Furthermore, the crisis has caused a substantial increase in downstream petrochemical product and intermediate prices, rising by 15-25% in the past two weeks due to tighter supplies and companies prioritizing domestic demand. Morgan Stanley emphasizes that the duration of this crisis will be crucial in determining the full extent of its impact on Asia's energy-intensive industrial supply chains. Prolonged disruptions could force economies to consider alternative power generation fuels or industrial consumption curbs.
