China Maintains Self-Reliance in Urea Production; Unaffected by Iran Conflict

China has leveraged its vast coal reserves to base 78 percent of its global urea production on coal. Following the onset of conflict in West Asia at the beginning of 2026, which disrupted the vital Hormuz Strait trade route, urea prices surged by as much as 70 percent. In response, China has prioritized domestic food security by imposing export restrictions on 50 to 80 percent of its fertilizer, contributing to increased fertilizer shortages in the global market.

While natural gas serves as the primary raw material for urea production in much of the world, China’s effective utilization of its abundant coal resources has enabled it to achieve unprecedented self-reliance in this sector. Approximately 78 percent of China’s total urea output is produced through coal-based processes. This approach distinguishes China’s production model as more secure compared to countries heavily dependent on natural gas, such as Qatar, Russia, and Saudi Arabia.

At the start of 2026, the West Asian conflict led to the closure of the Hormuz Strait, a crucial maritime channel responsible for 30 percent of the world’s fertilizer trade, causing urea prices to climb by 70 percent. However, China’s coal-based production system and reliance on domestic energy resources have enabled it to maintain adequate and secure stockpiles in the market. According to Reuters, urea prices within China currently remain about one-third of international market levels.

Last year, China exported fertilizers valued at over $1.3 billion, with a significant portion destined for Malaysia, Vietnam, Indonesia, and New Zealand. Specifically, Malaysia sourced 67 percent and Indonesia 44 percent of their total fertilizer imports from China. Nevertheless, due to supply disruptions caused by the conflict and China’s focus on safeguarding domestic food security, export restrictions covering 50 to 80 percent of its fertilizer exports have been implemented, further amplifying fertilizer shortages in the global market.