From the supply side, as a typical high-energy-consuming product, yellow phosphorus faces strict policy controls on new capacity additions. Concurrently, energy consumption standards and capacity scale requirements are accelerating industry-wide energy conservation, carbon reduction, and the phasing out of outdated small-scale production facilities. On the demand side, yellow phosphorus is primarily used in thermal phosphoric acid, glyphosate, and phosphorus trichloride. On one hand, terminal demand for new energy applications, represented by lithium hexafluorophosphate, is growing rapidly, while traditional sectors like glyphosate have maintained relatively stable demand in recent years. On the other hand, the sustained rise in sulfur prices has increased the cost of wet-process phosphoric acid, indirectly enhancing the cost-effectiveness of thermal phosphoric acid while potentially creating room for yellow phosphorus price increases.

Supply Side: Regional Concentration of Capacity is Pronounced, New Capacity Strictly Constrained

Yellow phosphorus supply is primarily concentrated in Guizhou, Yunnan, Hubei, and Sichuan, with a relatively high proportion of small-scale capacity. Production hubs are located in phosphorus-rich regions abundant in hydroelectric resources, such as Yunnan, Sichuan, Guizhou, and Hubei. Hubei primarily supports local industrial needs, while market supply relies mainly on Yunnan, Sichuan, and Guizhou. By 2025, Yunnan's yellow phosphorus output is projected to account for 46% of China's total production. Regarding the competitive landscape, according to data, facilities with capacities below 50,000 tons account for approximately 47% of total capacity, those below 30,000 tons account for about 27%, and those below 20,000 tons account for roughly 14%.

Policy-wise, strict controls on new capacity and energy consumption standards are in place, with the phasing out of outdated capacity being an inevitable trend.

Since the 14th Five-Year Plan period, policies targeting the yellow phosphorus industry have centered on strict control of new capacity, elimination of outdated capacity, and energy conservation and carbon reduction: The “14th Five-Year Plan for Green Industrial Development” explicitly states, “Strictly control new capacity in industries such as urea, ammonium phosphate, calcium carbide, caustic soda, and yellow phosphorus. New projects must implement capacity replacement on an equal or reduced basis.” The Catalogue for Industrial Structure Adjustment (2024 Edition) explicitly classifies yellow phosphorus production facilities with single-unit capacities below 5,000 tons/year as capacity to be phased out. Regarding energy consumption, the Implementation Guidelines for Energy Conservation and Carbon Reduction Upgrades in Key High-Energy-Consuming Industries (2022 Edition) explicitly states: “By 2025, the proportion of yellow phosphorus production capacity meeting or exceeding the energy efficiency benchmark level shall reach 30%, while capacity below the energy efficiency baseline level shall be essentially eliminated.”

Demand Side: Thermal Phosphoric Acid and Glyphosate Dominate Downstream Applications, with Steady Growth in Apparent Consumption

The primary downstream applications of yellow phosphorus are thermal phosphoric acid (33%), glyphosate (27%), and phosphorus trichloride (24%). Over the past five years, China's apparent consumption of yellow phosphorus has shown a fluctuating upward trend, with projected consumption reaching approximately 1.0019 million tons in 2025—an 18% year-on-year increase. Demand in traditional sectors like glyphosate has stabilized in recent years, while new energy applications—represented by lithium hexafluorophosphate—are experiencing rapid growth.

Sulfur price hikes increase hydrometallurgical route costs, potentially creating indirect pricing opportunities for thermal phosphoric acid and yellow phosphorus

According to the “Technical and Economic Analysis of Thermal Phosphoric Acid vs. Wet-Process Industrial Phosphoric Acid,” producing one ton of wet-process industrial phosphoric acid consumes 1.292 tons of sulfur. Using early 2025 as the baseline, domestic sulfur prices reached 4,065 yuan/ton by February 4, 2026—a cumulative increase of 2,569 yuan/ton, representing approximately 172% growth. Based on sulfur consumption per ton, this has cumulatively increased the production cost of wet-process industrial phosphoric acid by 3,319 yuan per ton. Since May 2025, thermal phosphoric acid prices have fallen below wet-process phosphoric acid, with the price gap widening. Concurrently, thermal phosphoric acid offers higher purity than wet-process phosphoric acid. Therefore, against the backdrop of rising sulfur prices, thermal phosphoric acid has become relatively more cost-effective.

It is projected that sulfur supply growth will lag behind demand growth in 2026, keeping prices elevated with greater upside potential than downside risk. Should Russia's supply recovery fall short of expectations or new energy production exceed forecasts, prices may continue to rise. If sulfur prices continue to climb, wet-process costs will further increase, indirectly creating upward pricing potential for thermal-process phosphoric acid and its raw material, yellow phosphorus.

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