On May 14, a sudden fire broke out at a yellow phosphorus plant in Guizhou province. The incident affected a production capacity of 40,000 tons, resulting in the complete shutdown of all four electric furnaces at the facility. This directly exacerbated regional supply tightness and drove a sustained upward trend in yellow phosphorus spot prices. From May 18 to 19, the yellow phosphorus spot market continued its rally; driven by the combined effects of contracting supply, cost-side support, and recovering demand, market trading remained active, and the price center of gravity shifted steadily upward.
I. Yellow Phosphorus Spot Market Performance (May 19)
On May 19, yellow phosphorus spot prices continued their upward trajectory. The benchmark price reported by SunSirs stood at 32,429.33 RMB/ton—an increase of 1.04% compared to May 18 (32,096.00 RMB/ton). This brought the cumulative increase for the month to 16.84%, representing a year-on-year increase of 44.16%.
Quotes in Major Regions: Ex-factory prices for yellow phosphorus ranged from 32,300 to 32,500 RMB/ton in Yunnan province, and 32,400 to 32,600 RMB/ton in Sichuan province. In Guizhou, prices remained firm—ranging from 32,500 to 32,800 RMB/ton—due to the impact of the aforementioned accident. The average transaction price in the East China and South China markets ranged from 32,600 to 33,000 RMB/ton. Overall, spot supply remains tight, and traders demonstrate a strong willingness to hold firm on prices.
II. Domestic and International Capacity and Output
Domestic Capacity and Output
Domestic yellow phosphorus production capacity is concentrated primarily in four provinces: Yunnan, Sichuan, Guizhou, and Hubei. The total installed capacity stands at approximately 1.58 million tons. In 2025, actual output is projected to reach 1 million tons, resulting in a capacity utilization rate of 63%. Looking ahead to 2026, under the influence of "dual control" policies on energy consumption, stricter environmental regulations, and enhanced production safety protocols, the addition of new capacity will be strictly controlled. Concurrently, the phase-out of outdated capacity will accelerate, stabilizing effective production capacity within the range of 1.18 to 1.22 million tons. In May, the operating rate in the Yunnan-Guizhou-Sichuan region stood at approximately 65%, representing a slight month-on-month decline. Following an industrial accident in Guizhou, the regional operating rate dropped below 50%, resulting in a monthly production volume decrease of approximately 8% compared to the previous month.
Global Capacity and Production
Global yellow phosphorus production capacity totals approximately 1.8 million tons, with China accounting for around 85% of this total. Overseas capacity is primarily concentrated in countries such as Morocco, the United States, and Kazakhstan. Most overseas facilities consist of aging production lines and operate at relatively low utilization rates; in May, the global operating rate was approximately 55%, with production volume remaining flat month-on-month. Consequently, overseas production is currently insufficient to fill the supply gap in the Chinese market.
III. April Phosphate Rock Import and Export Volumes
In April 2026, China's imports of phosphate rock amounted to 207,000 tons—a 13.5% increase month-on-month—at an average import price of US$95.5 per ton, up 19.6% from the previous month. Export volumes remained negligible, consisting primarily of small quantities of high-grade ore. The main source countries for imports were Morocco, Jordan, and Peru, with Morocco accounting for over 60% of the total.
IV. Inventory Status
As of mid-May, domestic social inventories of yellow phosphorus stood at approximately 65,000 tons. This represents a month-on-month reduction of 8,000 tons and a year-on-year decline of 35%, placing inventory levels at a multi-year low. Specifically, inventories totaled 28,000 tons in Yunnan, 15,000 tons in Sichuan, and—due to the aforementioned accident—dropped to 6,000 tons in Guizhou; an additional 16,000 tons were held in scattered inventories across the East and South China regions. The primary drivers behind this continuous inventory depletion are a contraction in supply and restocking driven by rigid downstream demand, compounded by heightened market sentiment toward stockpiling following the accident; consequently, these low inventory levels are providing strong price support.
V. Factors Influencing Prices
1. Supply Contraction
The industrial accident at a facility in Guizhou directly resulted in the suspension of 40,000 tons of production capacity, which is unlikely to be restored in the short term. Furthermore, ongoing domestic environmental protection measures and energy consumption controls—coupled with an increase in maintenance shutdowns at aging facilities—have kept operating rates at low levels. With limited capacity expansion overseas and insufficient supplementary imports, the overall tight supply landscape has become increasingly pronounced. 2. Cost-Side Support
Upstream phosphate rock prices remain firm; as of May 19, the benchmark price for 30%-grade phosphate rock stood at 980 RMB/ton, a month-on-month increase of 2%. Electricity costs account for over 40% of yellow phosphorus production costs; with electricity rates remaining high during the dry season—coupled with stable coke prices—the production cost for yellow phosphorus is currently estimated at approximately 28,000–29,000 RMB/ton, providing strong cost-side support.
3. Demand-Side Recovery
Demand from downstream sectors—including phosphoric acid, glyphosate, flame retardants, and lithium iron phosphate for new energy applications—is steadily recovering, characterized by ample orders and robust purchasing driven by essential needs. Furthermore, due to high sulfur prices, there is increased demand for wet-process phosphoric acid as a substitute for thermal-process phosphoric acid, thereby indirectly boosting demand for yellow phosphorus.
4. Policy and Market Sentiment
Under the "14th Five-Year Plan," the addition of new yellow phosphorus production capacity is strictly controlled, and environmental compliance inspections have become a routine norm, resulting in increased supply rigidity within the industry. Additionally, a recent industrial accident in Guizhou province has sparked market concerns regarding supply security, fostering a strong bullish sentiment; consequently, traders are reluctant to sell, opting instead to hold onto inventory to support prices.
VI. Benchmark Prices and Sales Performance of Upstream and Downstream Products
Upstream Products (Benchmark Prices as of May 19)
Phosphate Rock: 980 RMB/ton (up 2% month-on-month); supply is tight, and sales are robust.
Coke: 2,250 RMB/ton; prices remain stable, and trading activity is steady.
Electricity: Industrial electricity rates remain at high levels, providing solid cost-side support.
Downstream Products (Benchmark Prices as of May 19)
Phosphoric Acid: 9,400 RMB/ton (up 3.87% month-on-month); order books are full, and sales are strong.
Glyphosate: 78,000 RMB/ton; prices remain firm, driven by vigorous export demand.
Lithium Iron Phosphate (LFP): 155,000 RMB/ton; market operations are stable, supported by demand from the new energy sector, with both production and sales performing strongly.
Overall, prices for both upstream and downstream products are trending upward in tandem. Downstream sectors are exhibiting strong essential demand, with orders currently booked through June, resulting in an active and dynamic market trading environment. VII. Future Market Outlook
The repercussions of the accident in Guizhou persist; a contraction in supply—compounded by low inventory levels—provides strong cost support, while downstream demand is steadily recovering. Consequently, prices are more prone to rising than falling. Demand from downstream sectors—specifically new energy and high-end phosphates—continues to grow, with peak-season demand expected to be released in a concentrated surge. Key factors to monitor closely include the status of production capacity recovery in Guizhou, the supply of phosphate rock, and the actual realization of downstream demand.
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