Indonesia Draws Surging Urea Demand as Hormuz Closure Disrupts Global Fertilizer Trade

Indonesia Becomes a Sought After Fertilizer Supplier

Indonesia's fertilizer industry is drawing urgent requests from overseas buyers as the closure of the Strait of Hormuz disrupts a shipping corridor carrying approximately one third of global fertilizer trade. As of March 28, 2026, countries facing shortages are seeking large quantities of Indonesian urea, with Deputy Agriculture Minister Sudaryono saying buyers are willing to pay premium prices to secure supplies.

State owned Pupuk Indonesia has annual fertilizer production capacity of 14.5 million tons. Its urea capacity exceeds domestic requirements, giving Indonesia room to respond to international demand while protecting supplies for its own farmers. The opportunity comes as global urea prices have risen approximately 25 to 35 percent since the conflict began.

Sudaryono, speaking in Jakarta on Thursday, described the requests arriving as the conflict between Iran and the United States disrupted access to supplies from the Persian Gulf.

"Because of this war, many countries are looking for urea. They want to import it from Indonesia and are asking us to export large quantities, regardless of the price," Sudaryono stated.

The Strait of Hormuz connects the Persian Gulf to the open ocean. Its effective closure has interrupted access to major fertilizer suppliers just as farmers across the Northern Hemisphere prepare for spring planting. Urea supplies nitrogen, a nutrient crops need to grow, making a shortage a problem for food production as well as international trade.

Indonesia's advantage rests partly on its own natural gas reserves, which supply the main raw material for nitrogen fertilizer production. Yet the same crisis that is creating export opportunities also threatens its manufacturing costs, energy security and government finances.

Why the Hormuz Disruption Reaches Farms

Qatar, Saudi Arabia, Oman and Iran rank among the world's largest suppliers of urea and agricultural inputs based on phosphate. Their position makes the disruption of the Strait of Hormuz especially serious: a shipping blockage in one location can affect fertilizer deliveries to farms across several continents.

Approximately one third of global fertilizer trade moves through the corridor. A prolonged interruption threatens severe shortages of nitrogen fertilizers during the Northern Hemisphere's spring planting season, when farmers need supplies on time to support crop growth.

The crisis affects both transport and manufacturing. Qatar Energy halted production at the world's largest urea plant operating at a single site after attacks on liquefied natural gas facilities interrupted its natural gas feedstock. The shutdown removed millions of tons of annual production capacity at a time of peak seasonal agricultural demand.

Liquefied natural gas, or LNG, is natural gas converted into liquid for transport. For fertilizer manufacturers, a loss of gas supplies can mean a loss of the material needed to produce fertilizer, even when a factory itself is still standing.

Urea futures contracts have risen 35 percent in just two weeks. Those contracts reflect prices agreed for delivery at a later date. In the Middle East, urea prices surged 19 percent within a single week of the blockade. Together with the broader increase of approximately 25 to 35 percent since the conflict began, the figures show how quickly buyers have faced higher costs.

What Indonesia Can Supply

Pupuk Indonesia's corporate secretary, Yehezkiel Adiperwira, said the group maintains total annual fertilizer production capacity of 14.5 million tons. That figure covers fertilizer production across the group, while its urea capacity alone is greater than Indonesia's domestic needs.

Adiperwira said locally available natural gas, with supply and pricing controlled by the government, supports the country's ability to keep producing urea through the disruption.

"National urea production is essentially self-reliant since its key raw material, natural gas, is available locally and its supply and pricing are controlled by the government," Adiperwira explained.

Therefore, despite the escalation of the conflict in the Strait of Hormuz, this situation will not directly impact the national urea fertilizer supply.

Pupuk Indonesia has reassured domestic and international markets that it has sufficient capacity to meet rising demand without compromising local agricultural needs. The company ranks as the largest urea producer across the Asia-Pacific, Middle East and North Africa regions, giving it an important role in supplying buyers while other producers face disruption.

Domestic gas reserves also help shield Indonesian fertilizer production from volatile international natural gas markets. European and other producers have had to curtail operations because of those pressures. Indonesia's local supply gives its factories a degree of production security that manufacturers dependent on imported gas lack.

Older Plants Get More Time

Several aging Indonesian fertilizer plants had been scheduled for gradual decommissioning because of operational inefficiencies and high maintenance costs. The jump in international demand and prices could now keep those facilities operating temporarily.

Sudaryono said the crisis had created an opportunity to continue using plants that the government had intended to replace.

"This has become an opportunity. Plants that we initially planned to replace can temporarily continue operating because many countries are requesting urea," the Deputy Minister explained.

In the midst of this crisis, our fertilizer industry is gaining new momentum.

Higher selling prices can change the economics of an older factory. A plant that is expensive to maintain may become more attractive to operate when buyers urgently need its output and are willing to pay more. Indonesia's response therefore involves both its existing production capacity and the possibility of extending the working lives of facilities previously marked for replacement.

The additional operating time could help meet immediate requests while global markets adjust to the Hormuz blockade. Domestic food security remains part of that calculation: export demand is rising, but Indonesian farmers still need dependable supplies.

India's Search for Alternative Suppliers

India purchases more than 40 percent of its urea and phosphatic fertilizers from Middle Eastern suppliers. The disruption has affected its own factories as well as imported fertilizer: three domestic plants have reduced output because of declining LNG imports from Qatar.

New Delhi is accelerating efforts to diversify supplies ahead of the kharif sowing season, which begins in June. Kharif refers to the crop planting season associated with the summer rains. A shortage before sowing could leave farmers struggling to obtain fertilizer when they need it.

India's search includes Indonesia, Russia, Morocco, Jordan, Belarus and China. Trade figures show that Indonesian urea exports to India rose from $10.9 million in 2024 to $342.8 million in 2025, a rapid shift toward Indonesia that preceded the current crisis. The 2025 value was more than 31 times the 2024 figure.

The main dates place that trade change alongside earlier pressures and the next agricultural deadline:

• 2022: Russia's invasion of Ukraine disrupted fertilizer markets, while the closure of Incitec Pivot's Brisbane facility reduced Australia's domestic urea production capacity.
• 2024: Indonesian urea exports to India were valued at $10.9 million.
• 2025: Those exports reached $342.8 million.
• March 28, 2026: Indonesia faced surging requests for urea amid the Hormuz disruption.
• June 2026: India's kharif sowing season begins, making timely fertilizer supplies a pressing concern.

Shipping Security and Diplomatic Efforts

Indonesia's ability to produce fertilizer is one part of the response. Delivering cargoes to international buyers presents logistical difficulties, while the country's wider shipping and energy interests remain exposed to the crisis.

The Indonesian Ministry of Foreign Affairs has intensified engagement with Iranian authorities to secure safe passage for Indonesian vessels through the contested strait. Foreign Ministry spokesperson Yvonne Mewengkang said Indonesia's ambassador in Tehran remained in continuous communication with Iranian officials about maritime security.

Mewengkang described the importance of those diplomatic contacts during a recent briefing.

"We will continue to push for intensified diplomatic approaches regarding this issue because it is crucial for us," Mewengkang stated.

The ministry has expressed hope that the recent transition in Iran's leadership could create openings for de-escalation, although regional tensions remain acute. Indonesia is trying to pursue export opportunities while protecting its vessels, shipping access and energy imports.

The UN Security Council adopted Resolution 2817 condemning Iranian attacks on neighboring countries and civilian infrastructure. Tehran rejected the measure, arguing that it failed to acknowledge Israeli and American aggression that killed hundreds of Iranian civilians, including schoolgirls.

Diplomatic efforts therefore take place amid disagreement over the conflict itself, as well as immediate concerns about maritime safety. For Indonesian businesses, production availability and secure transport are both necessary to turn overseas demand into completed deliveries.

Energy Costs Threaten Indonesia's Wider Economy

Trade Minister Budi Santoso has warned that Indonesia's fertilizer opportunity comes alongside substantial economic risks. Higher energy prices could spread through manufacturing, increase operating costs and weaken the competitiveness of Indonesian exports.

Santoso identified factories that depend on energy for their production processes as especially exposed.

"The manufacturing sector is among the most vulnerable," Santoso noted.

Energy-dependent production processes in Indonesia could face higher operational costs. Rising production costs may reduce business margins or trigger increases in consumer goods prices.

Indonesia maintains approximately 20 days of oil reserves. That leaves it susceptible to supply shocks even though it can export fertilizer and has local natural gas available for urea production. Different parts of the economy face different levels of exposure to imported energy.

The 2026 state budget assumed an Indonesian crude price of $70 per barrel. Every dollar increase above that level adds trillions of rupiah to subsidy costs while bringing in substantially less additional revenue. Higher oil prices can therefore put pressure on public finances at the same time that some exporters receive better prices.

Santoso's response includes stimulating consumption and working with the private sector to safeguard domestic trade. The government plans to strengthen protections for the domestic market and diversify export destinations, using local demand as a buffer against global volatility and reducing reliance on any single trade corridor.

Australia and Asian Neighbors Feel the Pressure

Australia imports more than half its urea from the United Arab Emirates, Qatar and Saudi Arabia. Its domestic production capacity is negligible following the 2022 closure of Incitec Pivot's Brisbane facility, leaving farmers especially exposed to interruptions in overseas supplies.

Australian farmers typically absorb higher input costs rather than reduce production. Sustained fertilizer price increases could eventually reach consumers through food prices, even when farmers continue planting and growing crops.

Across Asia, governments are already taking steps to conserve energy. Bangladesh has imposed fuel rationing and closed universities, while Nepal has announced cooking gas rationing. Thailand has introduced a work week of four days for government offices and urged residents to limit air conditioning to 24 degrees Celsius.

China holds strategic petroleum reserves of approximately 1.4 billion barrels and has reportedly negotiated passage for its vessels through the strait despite the general blockade. That access could give it preferential access to Middle Eastern energy and petrochemical supplies while other countries look for alternatives.

Fertilizer shortages add another layer to those energy pressures. Agricultural economists warn that a prolonged shortage could lead farmers to apply less fertilizer, lowering crop yields during a growing season already strained by climate variability. Indonesia's additional supplies could help importing countries, but the crisis reaches beyond any single exporter.

Why Natural Gas Matters to Food Production

Nearly half the world's population depends on food produced using synthetic fertilizers. Their production remains concentrated in regions that can be exposed to geopolitical conflict and relies heavily on fossil fuel feedstocks.

The Haber-Bosch process, invented more than a century ago, remains the foundation of modern fertilizer production. It uses natural gas in an energy intensive process to make ammonia, which is then processed into urea. This connects the availability and cost of gas to the fertilizer farmers use on their fields.

Cheap natural gas is concentrated in the Middle East, Russia and North America. Fertilizer production has developed around that resource, creating supply networks in which interruptions to a major producing region or shipping route can spread quickly to distant agricultural markets.

China had already restricted fertilizer exports to protect domestic food security before the Hormuz closure. Those restrictions contributed to shortages that triggered protests in India. Russia's invasion of Ukraine in 2022 also disrupted fertilizer markets, driving 22.3 million additional people into hunger and exposing the fragility of concentrated production networks.

Researchers point to decentralized production of green fertilizer using renewable energy as a way to reduce those vulnerabilities. Current infrastructure investment lags behind immediate market needs. India and Brazil have accelerated policies to develop domestic fertilizer production powered by renewable energy following recent supply shocks.

Those projects address the longer term problem of dependence on a limited number of gas suppliers and transport routes. The immediate problem remains getting enough fertilizer to farmers before planting deadlines.

How Long Could Indonesia's Opportunity Last?

Indonesia's window for expanding fertilizer exports depends heavily on the duration of the Hormuz closure. No date for reopening the strait has been given. India's June sowing season is a concrete deadline for one major buyer, while farmers elsewhere are already preparing for spring planting.

A quick resolution of the conflict would allow Middle Eastern producers to resume operations and could bring prices back toward previous levels. A prolonged interruption could change trade patterns more deeply, encouraging importers concerned about supply security to establish Indonesia as a lasting alternative.

Qatar has declared force majeure on gas contracts, while Bahrain has reported refinery damage from missile strikes. Force majeure is a contractual provision used when exceptional events prevent a company from fulfilling its obligations. Such declarations show how the conflict is affecting commercial commitments as well as physical production and shipping.

Diplomatic efforts continue to seek de-escalation. Indonesian producers meanwhile face a combination of profitable export opportunities, pressure to increase operations and the responsibility to maintain domestic fertilizer supplies.

Pupuk Indonesia's position as the largest urea producer across the Asia-Pacific, Middle East and North Africa gives Indonesia greater weight in discussions with countries seeking scarce supplies. Its ability to keep producing while larger suppliers remain offline strengthens its role in global agricultural supply chains.

Indonesia's challenge is to convert that production advantage into reliable deliveries while managing the wider costs of the crisis. Fertilizer exports may bring gains, but higher energy bills, vulnerable shipping routes and domestic food security commitments remain part of the same economic picture.

Key Points

• Indonesia is receiving urgent requests for large quantities of urea following the effective closure of the Strait of Hormuz.
• The strait carries approximately one third of global fertilizer trade.
• Pupuk Indonesia has total fertilizer production capacity of 14.5 million tons annually, with urea capacity exceeding domestic requirements.
• Global urea prices have risen approximately 25 to 35 percent since the conflict began; futures rose 35 percent in two weeks.
• Older Indonesian plants scheduled for replacement may temporarily continue operating to meet demand.
• Indonesian urea exports to India increased from $10.9 million in 2024 to $342.8 million in 2025.
• India is diversifying supplies ahead of its kharif sowing season in June.
• Indonesia is pursuing talks with Iran on safe passage for its vessels while facing higher energy costs and holding approximately 20 days of oil reserves.