Fertilizer producers hit by input shortages
The guest highlighted that fertilizer producers face severe operational headwinds due to physical supply chain bottlenecks for key inputs like sulfuric acid, despite high end-product prices.
The argument
The guest pointed to Mosaic cutting its capital expenditure and guidance due to an inability to source sufficient sulfuric acid, illustrating how physical supply constraints are disrupting even well-positioned US commodity producers. Furthermore, a prolonged closure of the Strait of Hormuz threatens to cut global nitrogen-based fertilizer supplies by 30%, risking localized famines.
The thesis, stress-tested
✓ What validates it
- ✓Further guidance downgrades from agricultural chemical producers
- ✓Sustained increases in sulfur or sulfuric acid spot prices
▸ Risks discussed
- ▸Normalization of sulfuric acid and urea supply chains
- ▸De-escalation of Middle East conflicts allowing shipping to resume
Hear it yourself
"years. And the, or I should say, you you would you're back to, fifteen year highs on, or took fifteen years for the indices to return get back to their highs. And then the other time was 04/2021, which was also not a good time to buy stocks. And so you've got this un unprecedented disruption of energy supplies. You're at the very early stages of that filtering through supply chains. You have unprecedented levels of globalization. You have unprecedented levels of of sovereign debt, and you have unprecedented levels of valuation of the world's biggest stock market."
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