Supply disruption, high input costs likely to hit fertiliser companies

Agrochemical stocks fell sharply as tensions in West Asia threatened supply chains and raised raw-material costs, with analysts warning of higher fertiliser prices, subsidy needs and margin pressure

Agrochemical stocks fell as much as 5 per cent during Monday's trade, amid geopolitical tensions in West Asia.

 

Supply chain disruption, higher raw material costs and anticipated weather conditions weighed on the stocks of key players.

 

While stocks in the sector were under pressure, the benchmark and broader indices experienced lower losses at 1.7-2.3 per cent.

 

At close, Gujarat Narmada Valley Fertilisers & Chemicals (GNFC) slipped 5.09 per cent followed by Gujarat State Fertilisers & Chemicals which was down 4.4 per cent.

 

National Fertilisers and Chambal Fertilisers and Chemicals lost 3.6 per cent each.

 

Among other stocks, Deepak Fertilisers & Petrochemicals Corporation (Deepak Fertilisers) was down 3.18 per cent, Fertilisers and Chemicals Travancore (-2.57 per cent) and Paradeep Phosphates was lower by 2.06 per cent.

 

The largest listed fertiliser stock, Coromandel International fell 1.13 per cent.

 

According to Kotak Institutional Securities, prolonged unrest in West Asia could not only push up input costs for Indian chemical companies but also have an impact on export revenues for certain firms.

 

The report highlighted that for January 2026, India’s exports of organic and inorganic chemicals declined 5.1 per cent month-on-month (M-o-M) and 0.2 per cent year-on-year (Y-o-Y).

 

On the other hand, imports rose 12.3 per cent M-o-M but fell 0.2 per cent Y-o-Y. 

 

This conflict-led supply shock has led to surge in prices across value chains, especially petrochemicals and fertilisers, points out Emkay Research.

 

The fertiliser industry will be hurt due to the double whammy of tightening of ammonia, diammonium phosphate (DAP), and urea imports from West Asia and suspension of Qatar Energy’s LNG production, says the brokerage.

 

India is dependent on Qatar Energy for 50 per cent of its liquefied natural gas (LNG) requirements. Thus, production of ammonia — a key feedstock for fertilisers — will be hit, impacting agrochemical companies like Chambal Fertilisers, Deepak Fertilisers and GNFC, among others.

 

Similarly, CRISIL Ratings also flagged that the ongoing uncertainties can lead to supply-chain disruption with possible impact on imports to India.

 

The country is also dependent on West Asia for 30 per cent of its imports of key raw materials and intermediates, such as rock phosphate, phosphoric acid and muriate of potash.

 

Furthermore, since the region also plays a key role in the global supply chain, there is likelihood of an increase in the international prices of urea and di-ammonium phosphate.

 

Additionally, LNG is a feedstock for manufacturing urea. Its reduced availability, or increased prices, will impact production or raise input costs. All of these, in turn, can result in a higher subsidy requirement than budgeted by the government, noted CRISIL.

 

Kotak Securities, in its report, said the 2026 Kharif cropping season is clouded by worries around a predicted strong El Nino and possible disruption in fertiliser supplies due to the conflict in West Asia.

 

Higher prices of crude oil should lead to broad-based increases in prices of petrochemicals. But the impact on margins is unclear and dependent on product specific supply-demand dynamics.

 

Any impact on specialty chemical prices may follow only with a lag.

 

The government has assured fertiliser companies that it is working on multiple plans to gradually lower the shortfall in LNG supplies from West Asia.

 

It would ensure that production of critical plant nutrients does not get hampered even if the war continues for a longer period.