Oil Gets the Headlines, but a Whole Host of Goods Shipped Via Strait of Hormuz Face Global Disruption

Oil and gas are not the only important commodities facing supply concerns and rising prices because of a dramatic drop in ship traffic in the Strait of Hormuz due to the threat of Iranian attacks.About one-third of global fertilizer supply passes through the strait. According to the United Nations, Sudan gets more than half of its fertilizer from the Persian Gulf region. Sri Lanka, Australia, and Tanzania each get about a third of their fertilizers from the region.China — a major fertilizer producer — has already tapped its fertilizer stockpiles early for the spring planning season due to disruptions in global trade flows. It has also taken measures to restrict fertilizer exports, Bloomberg reports.The Center for Strategic and International Studies says fears over supply issues have farmers across the Northern Hemisphere in uncertainty ahead of the planting season.“No region is completely insulated, and the effects of any sustained disruption could reverberate globally through higher input costs, lower crop yields, and, ultimately, higher food prices,” it said in recent research.The head of the American Farm Bureau Federation is warning that critical farm raw materials used in fertilizers that flow through the strait — among them urea, ammonia, nitrogen, phosphate, and sulfur-based products — are starting to hurt its member farmers.In a letter this month to President Trump, the Farm Bureau’s president, Zippy Duvall, said like oil, global fertilizer markets are highly vulnerable to disruptions in maritime transit routes. Mr. Duvall said farmers are facing “out-of-control inflation” at the same time that farm margins are extremely tight and many farmers are underwater on expenses. He asked the president to utilize the American Navy to provide and maintain safe passage for fertilizer shipments through the Strait of Hormuz.President Trump has suggested that the Navy could be used to guide ships through the narrow waterway in the face of threats from Iranian drones and mines, but the Navy has yet to escort any shipments.More than a dozen ships have been attacked in the waters near the strait this month. The latest was hit by a projectile early Tuesday while it was anchored off the coast of the United Arab Emirates, according to United Kingdom Maritime Trade Operations.Another raw good that relies on the strait is aluminum. About ten percent of the world’s raw aluminum comes from the Middle East. China, the world’s biggest aluminum producer, is benefiting the most from the disruption. It is buying up the precursor used to create aluminum that can’t reach the Middle East. China is paying discount prices for alumina, giving Chinese smelters record profit margins, Bitget reports. Another concern is helium. The noble gas is scarce on Earth and typically found trapped in natural gas deposits. Qatar supplies more than a quarter of the world’s helium needs. The country shut down the world’s largest liquified natural gas producing plant because of issues with the strait, dramatically affecting helium supplies.The helium is needed for computer chips used for artificial intelligence and the growing demand for those chips has already caused a global helium shortage. Ongoing issues in the gulf could drive up the cost of computers and phones that rely on those chips.Helium prices have already doubled since the start of the war and there are concerns they could double again if ship traffic does not quickly resume in the strait.Helium is also used in medical imaging. MRI machines need liquid helium to cool the magnets they use to create scans. A shortage could lead to medical scans being canceled or postponed.Europe normally gets about forty percent of its helium from Qatar but there are alternative suppliers. America is the world’s largest helium producer and could pick up some of the slack, Market Screener reports, but stockpiles in this country have been dwindling for years and there have been ongoing concerns for several years about demand outstripping supply.The shipping disruption in the strait could also have a major impact for American consumers at the pharmacy counter. Nearly half of the country’s generic prescriptions originate in India. Drug makers there use the strait to not only receive raw products to create the drugs, but also to ship finished medicines west, CNBC reported.

Oil Gets the Headlines, but a Whole Host of Goods Shipped Via Strait of Hormuz Face Global Disruption

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