IMAGE: SHUTTERSTOCK
NEPALI FARMERS for years endured a cruel lottery. When India, the traditional supplier, chose to throttle the flow of fertiliser across the border—say, during political tantrums—the paddies of the Terai plains went hungry for nitrogen. The solution, embraced with enthusiasm by Kathmandu, was to look north. China would provide what India withheld.
The numbers from the first seven months of this fiscal year show that bet paying off spectacularly. Fertiliser imports have more than doubled, to Rs42.6bn ($288m). China’s share has surged from 47% to 67%. India’s, in turn, has collapsed from 2.8% to 0.2%. For Nepal, the new dependency looked like strategic diversification. Now it looks like a trap.
The trouble is that Beijing has started to lock the door. The National Development and Reform Commission, China’s top economic planner, has in recent days instructed fertiliser exporters to halt overseas shipments of certain product lines, according to industry insiders and analysts briefed on the matter. There has been no official announcement, though.
The rationale is that China wants to preserve its own stockpiles of key agricultural inputs amid uncertainty over global supply chains and a closed Strait of Hormuz, thanks to the war in the Middle East, that has choked off access to sulphur, a critical ingredient. The result, for countries that have come to rely on Chinese fertiliser, is a sudden and unannounced reckoning.
Few have come to rely on it as thoroughly as Nepal. Official data shows just how exposed Kathmandu has become. Diammonium phosphate (DAP)—the fertiliser of choice for rice, wheat and maize—arrives exclusively from China. All 178,400 metric tonnes imported in the first seven months came from no other source. Urea, the other staple, shows greater diversity: Brunei, Russia, Qatar and Indonesia supply big volumes alongside China. But even here, China accounts for nearly 100,000 tonnes, making it the single largest source.
When the NDRC’s instructions to halt shipments began circulating, one employee at a fertiliser producer in Shandong province told the Financial Times that exports to India had been stopped, though some shipments to South-East Asia were still permitted. Nepal sits in an awkward middle ground: not the main target but not completely safe either.
Nepal turned to China out of understandable frustration. India’s historic role as the dominant supplier carried with it the risk of political embargo. By opening a second front, Nepal sought to create competition and security. The surge in imports this year—up 117% overall—suggested the strategy was working. But the nature of the new relationship has replicated the old vulnerability. Dependency on a single supplier, whether New Delhi or Beijing, leaves a country hostage to the exporting nation’s domestic priorities. China’s current priority is feeding its own farmers. Nepal, which imports nearly all its fertiliser, has no domestic production to fall back on.
The proximate consequences will be felt in the coming planting season. DAP and urea together account for 93% of Nepal’s fertiliser imports by volume. If Chinese supplies tighten, the alternatives are limited. Brunei and Russia can supply urea, and Nepal’s import data from other countries has grown by 44% this year, suggesting some success in finding new partners.
Yet no other country produces DAP in sufficient surplus to replace China’s output at scale. And the market for fertiliser is global; when one major exporter restricts supply, prices rise for everyone. Nepal, a small importer with limited bargaining power, will pay whatever the market demands.
There is a bigger lesson here for the small countries caught between Asia’s giants. Diversification of supply chains is meaningless if it merely substitutes one monopolist for another. Nepal’s government has long talked of developing domestic fertiliser production, perhaps through joint ventures with Chinese firms that have the technology and capital. Those conversations now have new urgency. But in the short term, the only hedge is to build stronger relationships with alternative suppliers (Brunei, Russia as well as Indonesia) before the next Chinese export pause catches the harvest unprepared. ■
