Iran-US War Hits Indian Farmers: Urea Makers' Ebitda May Fall 15% as LNG Supply Shrinks
An Iran-US war disrupts the LNG supply, threatening a 15% EBITDA drop for Indian urea makers.
India’s fertiliser sector is facing mounting pressure as the ongoing tensions linked to the Iran–US conflict disrupt global energy supply chains, with analysts warning of a sharp hit to profitability for urea manufacturers.
Industry experts estimate that earnings before interest, tax, depreciation, and amortisation (EBITDA) of urea companies could decline by nearly 15% in the first quarter of FY27. The primary reason is reduced availability of liquefied natural gas (LNG), a critical input that accounts for nearly 80% of the production cost in urea manufacturing.
Supply disruptions have already begun impacting operations, with several plants reportedly running at nearly half their capacity. Some global suppliers have invoked force majeure amid escalating tensions in West Asia, further tightening LNG availability.
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Lower utilisation levels are particularly damaging for the sector, as urea production is highly energy-intensive and dependent on operating efficiency. When plants run below optimal capacity, fixed costs per unit rise significantly, putting pressure on margins and overall profitability.
The impact extends beyond industry balance sheets, given the crucial role urea plays in India’s agricultural ecosystem. Nearly all domestically produced urea is used as fertiliser, making it vital for crop yields and food security.
India’s annual urea demand stands at around 37–39 million tonnes, with domestic production meeting a significant portion of this requirement. However, prolonged disruptions in LNG supply could not only dent production volumes but also increase reliance on imports, potentially straining government subsidies and farmer access.
Analysts caution that if geopolitical tensions persist, the sector may continue to face volatility in input costs and supply chains, making the coming months critical for both manufacturers and policymakers.
Also Read: Iran Accuses US Of Hypocrisy, Begging Global Buyers To Take Russian Oil
