19/03/26
Sulphur’s rally pre-empts Middle East price spike
Sulphur’s rally pre-empts Middle East price spike
London, 19 March (Argus) — Sulphur's sustained pre-crisis rally has left little
impetus for a fresh spike in price in response to the outbreak of the war in the
Middle East, unlike other commodities where prices have spiked. Sulphur prices
had risen rapidly through 2024 and 2025, exceeding the heights of 2022, as a
result of significant growth in demand from the metals sector alongside
increased demand for fertilizer production. The Indonesian nickel industry in
particular has seen exponential growth in sulphur demand for nickel refining,
prompting a 440pc increase in the cfr Indonesia price, from $101/t cfr on 4 July
2024 to $554/t cfr by 29 January 2026, prior to the start of the conflict.
Supply constraints in key production hubs in the latter part of 2025, such as
the FSU and parts of the Middle East, added further tightness to the market.
Prices peaked in January but affordability challenges were already becoming
evident, particularly from the non-metals sectors, prompting the start of a
correction in global prices in the weeks leading up to the war. The market for
sulphur had clearly decoupled from its traditional relationship with sulphuric
acid and phosphate fertilizers due to the entry of the battery metal industry,
and demand destruction was a factor. By the time the war broke out on 28
February, fertilizer producers and chemical industries, having weathered months
of tighter margins as sulphur prices reached unprecedented levels, were already
questioning how long these higher costs could be sustained. And although the
market was subject to a significant supply shock in the form of the closure of
the strait of Hormuz and the subsequent suspension of production at
QatarEnergy's Ruwais plant, prices did not immediately react. A sense of caution
prevailed in the market over the first two weeks of the conflict with suppliers
keen to avoid a surge in global prices for fear of further demand destruction.
And with buyers absenting themselves from the market, there was no significant
change to prices in the Middle East or related markets over this period. But the
weekly fob Middle East price had already risen by $425/t or more than 600pc in
the two years to January 2025 when it peaked at $531/t fob. Many larger
consumers have stocks in place and are typically quite resilient to supply chain
disruptions lasting a few weeks. This is the result of most seaborne sulphur
trade being shipped in solid form, with product able to remain in warehouses or
even open air storage for some length of time. Buyers and sellers can therefore
wait to see if sales concluded prior to the onset of the conflict can be
delivered within a reasonable delay, and if buyers are in a position to wait for
these shipments without the risk of double-booking. But as a co-product from oil
and gas refining, supply cannot be readily increased in times of scarcity.
Landlocked sulphur blocks in long-term storage remain in inland locations such
as Alberta province in Canada and Turkmenistan, but this cannot easily be
accessed as a result of sluggish processing and inland transportation
bottlenecks. In answer to the question around substitution, some consumers have
looked at replacing sulphur imports with sulphuric acid imports, where the
burning process is not required for energy generation. This has supported
sulphuric acid prices, but not all buyers are able to switch from one product to
another owing to logistical and other constraints. In terms of sulphur itself,
some product can be moved from the Saudi Arabian Red Sea ports of Jizan, Yanbu
and Rabigh, as well as from Oman's Duqm port that all bypass the closed strait
of Hormuz. But even if all vessel owners were prepared to load at Red Sea ports,
which they are not, this would still leave in excess of 45pc of global sulphur
supply stranded in the Mideast Gulf as long as the strait remains closed.
Defying the trend Although global prices have barely moved since the start of
the war, there is one market where the price has spiked and which has become a
bellwether for this market. Chinese domestic sulphur prices have been increasing
steadily over the course of the war to date, reaching record highs of
4,815-4,820 yuan/t ex-works by Wednesday, equating to a rise of more than 20pc
in just over two weeks. This market, where small lots trade from river
warehouses on a daily basis largely from port stocks of imported product, has
always been reactive to global trends. Although not always in strict alignment
with global prices, it can provide a good indicator for the health of the
market. China relies heavily on the Middle East for its sulphur requirements
primarily to feed the domestic phosphate fertilizer industry, taking about half
of the 9.6mn t imported in 2025 from the region. Is the market ultimately
turning? With no immediate end in sight to the conflict and with little in the
way of substitution for buyers requiring prompt material, the market may finally
be turning. Some part-cargoes to smaller consumers for prompt delivery and those
linked to the metals industry have emerged priced as high as $580-700s/t cfr to
the African market for late March-early April loading, with offers no lower than
this range for the limited spot tonnes available. But larger fertilizer
producers are resisting the latest run-up of prices and are likely to reduce
operating rates alongside many smaller fertilizer producers that have already
done so, leading to demand destruction on a larger scale. This may create a
two-tier market with sales in a wider range to different industries, and will
ultimately lead to a price cap on the basis of a lack of operating margin,
making fertilizer production uneconomical, and to the potential erosion of
prices. This may come prior to the strait fully opening to usual export flows if
demand destruction becomes widespread. We are also assuming some sulphur vessels
may be able to exit through the strait, with several Chinese-flagged vessels
loaded for export assuming a deal can be struck with Iran. Some consumers are
reportedly willing to look at booking Middle East volumes despite the lack of
clarity on delivery schedules. These factors may smooth out the curve of a spike
and crash from the logistical bottlenecks, with the 2022 crash still fresh in
the minds of many in the market as profoundly disruptive. By Maria Mosquera
China daily cfr Sulphur price v DAP $/t Send comments and request more
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