Iran War Impact: Production of ammonia-based products and gas-dependent chemicals down by 30-50%, says Indian Chemical Council President Ramya Bharathram

The conflict in the Middle East has led to severe disruption in the supply of LNG and LPG to India. This has had a profound impact on India’s chemical industry, where LNG and LPG are both the primary energy and feedstock input for much of the space. In an exclusive interview with Fortune India, Ramya Bharathram, President of the Indian Chemical Council and MD & CFO of Thirumalai Chemicals Limited, talks about the challenges the sector is facing, the short- and long-term impact of the disruption because of the conflict, and alternative options, among other things. Edited excerpts:

 Q: How has the chemical industry been affected by the war, now into the second month?

 Ramya Bharathram: The impact on the chemical industry has been both immediate and structural. LNG and LPG—the primary energy and feedstock inputs for much of our industry—have experienced severe supply disruptions following the conflict in West Asia. The chokepoint at the Strait of Hormuz has curtailed the flow of these critical inputs, and the consequences are cascading across the entire value chain.

Natural gas, which is the backbone of ammonia production, methanol synthesis, and a wide range of gas-based chemicals, has seen materially reduced availability for industrial users. Priority allocation has rightly been extended to fertilisers and city gas distribution, but this has meant that other gas-dependent chemical processes—from chlor-alkali to industrial gases to petrochemical intermediates—are operating at suboptimal levels or have been temporarily halted.

Compounding the supply squeeze is a sharp escalation in costs. Prices of naphtha, ethylene, propylene, benzene, and other petrochemical feedstocks have risen steeply. Freight rates and war-risk insurance premiums on cargo from the Middle East have surged, adding further burden. The result is a dual crisis of availability and affordability that is straining the economics of production across the board—for bulk chemicals, intermediates, and downstream speciality products alike.

Q: Which sectors of the chemical industry have been badly affected by this conflict?

Ramya Bharathram: The most severely affected segments are those directly dependent on LNG, natural gas, and Middle Eastern petrochemical feedstocks. Nitrogenous fertilisers—urea, ammonium nitrate, ammonium sulphate—are at the centre of the crisis, given their complete dependence on ammonia derived from natural gas. Gas-based methanol production and downstream products such as formaldehyde, DMF, and acetic acid are also significantly impacted.

Chlor-alkali products—caustic soda and chlorine, which are energy-intensive to produce—are facing cost pressures being transmitted downstream to PVC, epichlorohydrin, and chlorinated solvents. Agrochemical intermediates dependent on chlorine chemistry and aromatic feedstocks are facing a compound squeeze. Surfactants and detergent intermediates that rely on ethylene oxide and propylene oxide are also under pressure.

Further down the value chain, the disruption is being felt in plastics and polymers, construction chemicals, textile processing chemicals, water treatment products, and automotive coatings—all consumers of intermediates now in short supply. The breadth of this impact reflects how deeply integrated the chemical industry is into India’s broader manufacturing and agricultural economy.

Q: How many Indian Chemical Council members have curtailed their production, and to what extent?

Ramya Bharathram: Based on our ongoing engagement with member units, production curtailment is widespread and deepening week by week. Among producers of ammonia-based products and gas-dependent chemicals, a significant number of units have curtailed output by 30-50%, with some having suspended operations temporarily due to the complete non-availability of feedstock at viable prices.

In the speciality chemicals and agrochemical intermediates segment, curtailments of 20-40% are being reported, primarily driven by the unavailability of specific imported raw materials and unviable production economics at current input costs. Chlor-alkali and downstream units are operating at reduced loads due to elevated power and feedstock costs. Dyes, pigments, and performance chemical producers—most of them mid and smaller units—are among the worst affected, given their limited ability to switch inputs or absorb cost shocks.

Unless conditions stabilise swiftly, we expect further curtailments and, in some cases, temporary closures across these segments in the coming weeks. The situation demands urgent attention and coordinated action from both industry and government.

Q: Shortage of LNG and resultant ammonia shortage is closing down many speciality chemical plants. Similarly, fertiliser units are curtailing production. What will be the impact in the short term and the long term?

Ramya Bharathram: The LNG shortage is hitting ammonia production hardest, and the ripple effects from there are severe. Ammonia is not just a fertiliser feedstock—it is a foundational raw material for nitric acid, ammonium nitrate, ammonium sulphate, urea, and a wide array of nitrogen-based speciality chemicals. When ammonia availability tightens, the impact is felt simultaneously across fertiliser production, refrigerants, explosives for mining, water treatment chemicals, and pharmaceutical intermediates.

In the short term, urea and di-ammonium phosphate (DAP) production is being curtailed, which directly threatens crop nutrition ahead of the upcoming agricultural season. A shortfall in these fertilisers at this stage could reduce crop yields, push up food prices, and increase the government’s subsidy burden. For speciality chemical plants dependent on ammonia derivatives, reduced throughput means delayed order fulfilment and loss of export contracts—damage that is difficult to reverse quickly.

Over the longer term, if LNG supply constraints persist, India risks a structural deficit in ammonia-based products, deepening import dependence at a time when global supply chains are themselves under stress. This underscores the urgency of accelerating investments in green ammonia using renewable hydrogen, domestic natural gas exploration, investment in CBG (compressed bio gas) and coal gasification as an interim bridge. The current crisis must become the catalyst for building genuine feedstock self-reliance.

Q: How much production hit is expected in the short- and long term?

Ramya Bharathram: In the short term, the impact is already material and worsening. Chlor-alkali plants dependent on natural gas for power are running at reduced loads. Methanol-based chemical chains—including formaldehyde, acetic acid, and their downstream derivatives—are facing feedstock shortfalls. Ethylene and propylene availability has tightened, affecting polyethylene, polypropylene, PVC, and the numerous plastics and packaging products derived from them. Across industrial clusters in Gujarat, Maharashtra, and parts of western India, capacity utilisation has dropped sharply.

Agrochemical intermediates, which depend on a combination of ammonia, chlorine, and imported aromatic feedstocks, are seeing production cuts at a critical time—just as demand for crop protection products peaks ahead of the kharif season. Dyes and pigments, which rely on benzene and naphthalene derivatives, are also facing input cost inflation and availability constraints.

In the longer term, if this situation extends beyond a few weeks, the consequences become more structural. Export commitments for speciality chemicals, agrochemicals, and pharmaceutical intermediates could be jeopardised. Investment decisions for new capacities may be deferred, and the competitive cost advantage India holds in several chemical segments could erode if input costs remain structurally elevated. The shortage of diesel fuel will also affect logistics.

Q: What are the possible alternative options?

Ramya Bharathram: On the feedstock side, the most immediate alternative being explored is the substitution of natural gas with naphtha or liquid fuels for certain chemical processes, though this comes with higher operating costs and technical limitations. For ammonia production specifically, some plants are evaluating partial shifts to coal-based syngas routes, though these are neither quick nor cost-neutral to implement. Sourcing LNG from the US, Australia, and East African suppliers is being actively pursued, but spot market availability is constrained and freight costs from these origins are significantly higher.

For petrochemical feedstocks such as ethylene, propylene, and benzene, producers are looking at alternative import origins, including Southeast Asia and the US. However, the lead times involved and the price premiums in a tight global market mean these are partial solutions at best. In the interim, many units are prioritising production of higher-margin products to protect profitability while operating at reduced overall throughput.

From a policy standpoint, the most impactful immediate interventions would be duty rationalisation on LNG imports and key petrochemical feedstocks, priority gas allocation to fertiliser and critical chemical production, expedited customs clearance for chemical raw material imports, and targeted working capital support for smaller producers. In the medium term, fast-tracking LNG terminal capacity, incentivising domestic gas production, and creating a strategic reserve for ammonia and key petrochemical intermediates would provide the structural resilience the industry urgently needs. As noted, we need to ramp up green ammonia and CBG. Also, biofuels and other future-looking technologies for diesel blends to reduce reliance on petrol and diesel must be pursued.

These are times of geopolitical change and supply chain risks. Energy and materials supply chains are critical. Every country must play to its strengths. India is rich in sun, soil, small farmers, and intellectual talent. We must seriously examine the potential of our biomass as a feedstock for our energy and material needs. For example, agricultural residue can be converted to CBG (as a direct substitute for CNG). Secondly, our biofuels, such as ethanol, can supplement and substitute petrol. Molecules such as DME (Di Methyl Ether), which are being researched and can be obtained from CO2, can substitute LPG. Ethanol has been and can be incentivised for making value-added chemicals. In this manner, all biomass can be examined to provide a long-term resource base to be valorised in the country.