The Urea Shortage Is Exposing Where the Next Fertilizer Plants Need to Be Built

Urea prices have risen sharply as disruption around the Strait of Hormuz restricts exports from some of the world’s lowest-cost producers.

Nitrogen remains the most widely used fertilizer nutrient, and urea accounts for a large share of internationally traded nitrogen products.

Gulf producers built major ammonia and urea industries around low-cost natural gas, with much of that output leaving the region through Hormuz.

As shipments tightened, buyers turned to Russia, China, North Africa, Nigeria and other producing markets for replacement cargoes.

Plants approved during the current shortage will come onstream years from now, when Gulf exports may have recovered and urea prices may be lower.

That puts more weight on locations with cheap gas and direct routes to major fertilizer markets outside Hormuz.

Cheap Gas Still Decides Where Urea Plants Can Compete

Conventional urea production depends on ammonia, and ammonia plants consume large volumes of natural gas.

Feedstock prices account for a large share of operating costs, particularly when urea prices fall from shortage-driven highs.

Nigeria’s urea industry is built around access to domestic gas. Dangote Fertiliser and Indorama operate in that market, while Gulf producers have developed large export industries on similarly low-cost feedstock.

Large ammonia and urea complexes can cost several billion dollars before production begins.

They also require dependable gas supply, utilities and industrial infrastructure over decades of operation.

Projects in markets with expensive or unreliable gas carry higher production costs before the first tonne is sold.

Nigeria, North Africa and the Atlantic Are Better Placed for New Urea Capacity

Nigeria’s urea plants can reach Atlantic buyers without routing cargoes through the Strait of Hormuz.

Domestic gas and existing production facilities give the country a platform for additional output, provided new projects can secure feedstock and finance.

Egypt and Algeria already produce ammonia and urea for export. Their Mediterranean ports connect them to European buyers and markets elsewhere in Africa, giving new capacity a route to customers outside the Gulf.

Trinidad and Tobago also supplies the Atlantic fertilizer market, with established shipping links to buyers in the Americas.

A plant outside the Hormuz route would avoid that particular chokepoint, but location alone would not secure its future.

Gas costs, port capacity and the price of urea when the plant begins operating would still determine whether it could compete.

High Urea Prices Can Make the Wrong Locations Look Attractive

New fertilizer developments outside established industrial centres may require dedicated gas pipelines and export facilities, adding substantial costs before production begins.

Expansion at operating complexes presents different constraints. Gas supplies may already be committed to existing plants, leaving developers to secure additional volumes before installing new ammonia and urea capacity.

Storage and loading facilities may also need expansion to accommodate higher output.

Inland projects face additional transport costs where rail connections are limited and fertilizer must travel long distances by road to reach export terminals.

Projects requiring extensive new infrastructure could face higher production and delivery costs than expansions at established industrial sites, particularly if urea prices decline before the new capacity enters service.

Government Control Over Gas Will Shape the Next Urea Plants

Natural gas reserves alone have not guaranteed new fertilizer investment. Governments must decide how much gas can be allocated to ammonia production when power stations, domestic industries and existing export commitments are competing for supply.

Ethiopia has moved ahead with a proposed fertilizer complex at Gode. Ethiopian Investment Holdings and Dangote Group signed a $2.5 billion agreement in August 2025 for a plant designed to produce up to 3 million tonnes of urea annually.

Dangote holds 60% of the venture and the Ethiopian government 40%. Ethiopian authorities announced the start of construction in October 2025.

The planned complex will require gas supplies from Ethiopia’s Somali Region, where developing the country’s natural gas resources has involved years of investment and government planning.

Renewable electricity could eventually support ammonia production in countries without large natural gas reserves.

The International Energy Agency estimates that ammonia produced through electrolysis costs about three times as much as conventional ammonia on average, excluding carbon-pricing policies.

Government decisions on gas development and industrial allocation will remain central to where new conventional urea plants are built.

Ethiopia’s project could add another major producing location if its planned capacity reaches operation.