Key takeaway: In 2025, the sulfur market experienced an independent surge driven by the rapid growth in demand from the new energy sector, with prices soaring to historical highs. Looking ahead to 2026, the fundamental imbalance of limited global sulfur supply growth remains unresolved, while increased demand from Chinese ferrous lithium phosphate and Indonesian nickel hydrometallurgy (MHP) is expected to be concentrated, significantly widening the supply-demand gap. The central price of sulfur is expected to rise further, with the possibility of exceeding historical highs.

2025 Review: Rising demand for new energy sources drove the third supercycle

Overview of core price trends throughout the year

In 2025, the price of sulfur in Shandong followed a clear trajectory of "bottoming out - gradual increase - stabilizing at a high level by the end of the year":

Early-year low (January-February): Prices remained around 1,691 RMB/ton at the beginning of the year, reaching the year's lowest point of 1,661 RMB/ton on February 10th. The market was relatively calm during this period.

The first surge in prices during the spring (March): On March 22nd, prices rapidly rose to 2,434 RMB/ton, a sharp increase of 46.5% compared to the low point at the beginning of the year, marking the start of this bull market.

Mid-year high-level consolidation phase (May-October): After the surge in March, the price formed a high-level platform in the 2,270-2,660 RMB/ton range for half a year. Although there were fluctuations during this period, the strong support at the bottom provided momentum for the next round of price increases.

Year-end acceleration (November): Entering the fourth quarter, prices broke through previous resistance levels, soaring to the year's highest point of 4,261 RMB/ton on December 10th, a 120% increase compared to the beginning of the year.

Year-end prices remained stable at a high level (December): Although there was a slight decline from the peak, the year-end price of 3,621 RMB/ton was still 114.1% higher than at the beginning of the year, demonstrating strong market support at high price levels.

The price trend chart for sulfur in Shandong in 2025 is not simply a reflection of commodity price fluctuations; it is a "cardiogram" that reflects the repricing of global sulfur resources in the context of the energy transition.

The sulfur market completely moved away from the cyclical fluctuations previously driven by the seasonal demand for agricultural inputs, and entered a structural bull market with a continuous upward trend. Each significant price surge was closely linked to global supply chain events (such as supply disruptions from Russia) and emerging demand drivers (such as ferrous lithium phosphate and MHP). Prices in the Shandong region became a sensitive indicator and leading indicator of the tightness in the Chinese and even global sulfur market.

The impact of sulfur imports on the market

The import data corroborates the market trend of sulfur prices soaring to historical highs in 2025. The sharp decline in imports in the second half of the year directly reflects the supply shortage caused by global (especially Russian) supply disruptions, which is one of the direct reasons for the sharp price increase of domestic sulfur at the end of the year and the resulting huge supply-demand gap. Imports, which account for a significant portion of China's sulfur supply, significantly exacerbated the tight market situation in the domestic market.

The driving factors behind this market rally are fundamentally different from those of the previous two cycles (which were dominated by the agricultural chemicals cycle):

1. Supply Side:

Global sulfur production capacity is concentrated, with Middle Eastern resources primarily supplying emerging markets such as Indonesia. Meanwhile, Russia, due to ongoing force majeure events affecting its refineries (expected to impact 1 million tons of supply in Q4 2025), has shifted from a net exporter to a net importer and implemented an export ban, leading to a significant reduction in globally available resources.

2. Demand Side:

The impact of traditional agricultural chemical (phosphate fertilizer) demand on prices has weakened. This has been replaced by explosive growth in demand from the new energy industry chain. According to reported data, the demand for sulfur in the new energy sector reache 8% by 2025, a 3 percentage point increase compared to last year.

China's ferrous lithium phosphate production has exceeded expectations, reaching 2.66 million tons from January to September 2025, with the full-year total projected to exceed 3.6 million tons. Based on an estimated consumption of approximately 1 ton of sulfur per ton of ferrous lithium phosphate, this represents a significant increase in demand for sulfur.

Indonesian nickel hydrometallurgy (MHP): As a key raw material for power batteries, its production continued to rise, leading to increased demand for sulfur (used in acid leaching), thus diverting international sulfur resources.

The fundamental contradiction lies in the fact that China, as the world's largest sulfur importer (with an import dependency of nearly 50%), lacks pricing power, and domestic prices directly reflect the balance of international supply and demand. The market situation in 2025 is a manifestation of the intense competition for sulfur resources between global supply events and emerging demand countries (China and Indonesia).

2026 Outlook: Supply-demand gap widens, leading to significant upward pressure on prices

Based on comprehensive report analysis, the sulfur market in 2026 will enter a new stage characterized by a deep interplay between "rigid supply constraints" and "concentrated demand release."

1. Supply side: Limited incremental supply, facing structural contraction in the long term

Sulfur is a byproduct of oil refining and natural gas processing. According to IEA forecasts, under the context of energy transition, global refining capacity and processing volume will peak after 2035 and gradually decline, fundamentally limiting the long-term supply ceiling of sulfur.

In 2026, China is expected to add approximately 400,000 tons of supply, and the Middle East is expected to increase production by approximately 2.1 million tons. However, the recovery of Russian refinery capacity remains uncertain (expected to be difficult to recover in the first half of 2026), and the overall global sulfur supply remains tight.

2. Demand side: New energy demand is accelerating with a "dual engine" approach

Chinese demand for ferrous lithium phosphate remains strong: With the penetration rate exceeding 80%, ferrous lithium phosphate production is expected to remain high, providing firm support for sulfur demand.

Indonesia's MHP production is about to reach its peak: this is the most critical demand variable for 2026. The report predicts that approximately 658,000 tons of new MHP production capacity will come online in Indonesia in 2026. Based on the industry standard of 10 tons of sulfur consumed per ton of MHP, this will generate an additional demand of approximately 6.58 million tons of sulfur. This massive demand will have a significant impact on already strained international trade flows.

3. Supply-Demand Balance and Price Outlook

Huge supply-demand gap: The report's model predicts that in 2025-2027, the global sulfur market will face supply-demand gaps of -300,000 tons, -5.13 million tons, and -4.05 million tons, respectively. 2026 is projected to be the year with the largest gap and the most pronounced imbalance.

Driven by a large supply-demand gap, the average price of sulfur is expected to rise further in 2026. The market will test and potentially break through the historical price range of 4,000-6,000 RMB/ton, and the magnitude and duration of the upward trend may exceed market expectations.

Looking further ahead, if sulfide solid-state battery technology is commercialized, the demand for high-purity sulfur will be several times that of traditional lithium-ion batteries, potentially opening up entirely new strategic growth opportunities for sulfur.

The core transformation of sulfur in the future

The future development of the sulfur industry hinges on achieving a transformation in three key aspects:

From "oil and gas byproducts" to "independent strategic minerals": their value is no longer dependent on the main product, but is driven independently by emerging downstream demand.

From "bulk raw material" to "critical energy material": With the development of technologies such as solid-state batteries, sulfur will become deeply embedded in the core supply chain of new energy.

From "cost item" to "investment item": Investing in sulfur resource acquisition channels, efficient utilization technologies, and recycling capabilities will become one of the core competencies of chemical and new energy companies.

Therefore, future breakthroughs will not only be in terms of quantity and price, but also systemic breakthroughs in industry roles, technological boundaries, and value dimensions.

Summary:

In 2025, the sulfur market was re-evaluated due to the rising demand from the new energy sector. Entering 2026, against the backdrop of normalized supply disruptions from Russia and long-term limitations in global refining capacity, the concentrated release of MHP (metal hydroxide precipitate) capacity in Indonesia will become a key driver of market trends. China, as a major importer and consumer, will continue to face pressure from rising import prices. Sulfur, a traditional chemical raw material, is increasingly becoming a crucial strategic commodity reflecting global energy transformation and changes in the industrial chain landscape. Investors should pay close attention to changes in the global sulfur supply and demand balance, especially the progress of Indonesian projects and changes in China's import costs.

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