China tightens fertilizer blend exports amid Iran conflict

Beijing is reportedly tightening fertilizer export restrictions.

Industry insiders say in recent days Chinese authorities have quietly instructed companies to freeze exports of nitrogen-potassium fertilizer blends (Bloomberg).

• They've also reiterated existing limits on urea exports.

We called it: When disruptions hit the Strait of Hormuz, we told readers to get ready for this exact playbook.

ICYDK: Nitrogen-potassium fertilizer blends combine granules of nitrogen (like urea) and potassium (like sulfate of potash, or SOP).

• China already restricts exports of urea and SOP – the new restrictions likely target firms mixing them together to skirt limits and capture soaring profits abroad.

There’s one big exception to China's fertilizer export restrictions: Ammonium sulfate (amsul).

Amsul isn't just a fertilizer. It's a byproduct of producing both metallurgical coke for steelmaking and a chemical precursor to nylon 6, the top global thermoplastic.

• Shutting down exports would overwhelm domestic inventories and disrupt major industrial chains.

Our take: Beijing is unlikely to curb amsul exports. If it does, something has gone seriously wrong.

Get smart: As long as the Iran conflict continues, Beijing will continue intervening in fertilizer markets around a broadly predictable set of goals.

• Top of the list is ensuring domestic farmers have ample supply at affordable prices.
• Next is keeping domestic fertilizer producers stable and acting in the national interest – particularly when it diverges from commercial interests.

Get smarter: Only then will the interests of trade partners be considered.

• Here, Beijing may look to burnish its bonafides as a trusted partner through government-to-government deals that prevent its firms from overtly profiting from the crisis.