In the first half of 2026, the global sulfur industry chain experienced unprecedented, violent volatility. The market traced a complete cycle—"surge to peak, topping out, and subsequent pullback"—driven by a progression of events: stable operations at the start of the year, a price explosion triggered by a geopolitical conflict in the Middle East in late February, and a sharp reversal following the US-Iran truce in mid-June. Domestically, the price of sulfur (Shandong) rose by approximately 157% over the six-month period, while the SMM China Copper Smelting Acid Index climbed by about 94%. Internationally, sulfur (CIF Indonesia) saw gains exceeding 126%, and sulfuric acid (CFR Indonesia) rose by roughly 185%; the global sulfur market witnessed a high-octane, volatile ride in tandem.

Event Background: Blockade of the Strait of Hormuz Triggers Global Sulfur Crisis

The extreme market conditions in the global sulfur industry chain during the first half of 2026 stemmed from a geopolitical shock that lasted over a hundred days.

On February 28, conflict erupted between the US and Iran, effectively sealing off the Strait of Hormuz—a critical waterway handling approximately 45% of global seaborne sulfur trade. Shipping volume through the strait plummeted by 90% at one point, cutting off the "lifeline" of the global sulfur supply chain. The Middle East accounts for roughly 25% of global sulfur production and about 45% of global export volume.

During the blockade, the volume of sulfur shipments stranded in the Persian Gulf peaked at between 800,000 and 1 million tons. Over the three-and-a-half-month conflict, total sulfur shipments amounted to only 80,000 tons.

On June 17, the US and Iran signed a memorandum of understanding (MOU) remotely, which took effect immediately; the formal agreement was signed by both parties on June 19. The agreement stipulated a phased reopening of the Strait of Hormuz within 30 days and the lifting of the US naval blockade. Since the announcement of the truce on June 15, approximately 640,000 tonnes of sulfur have passed through the strait—a stark contrast to the mere 80,000 tons shipped during the preceding three-and-a-half months of conflict. On June 23, Iran officially confirmed that the Strait of Hormuz was fully open to global commercial vessels for a 60-day period, with no transit fees charged during this time. As soon as supply concerns eased, the market triggered a panic sell-off. The price of granular sulfur at Zhenjiang Port plummeted from 11,750 RMB/tonon June 11 to 9,200 RMB/ton June 24. A surge of sulfur shipments—previously stranded in the Persian Gulf—combined with the phased repair and resumption of damaged oil and gas infrastructure in the Middle East, has opened a window for a temporary recovery in global sulfur supply.

However, a full recovery will take time. Even under the best-case scenario, a significant rebound in shipping volumes is unlikely before August. Most of the cargo currently flowing out corresponds to existing sales contracts; there are no ballast vessels returning to the Strait to load new shipments. Approximately 300,000 to 400,000 tons of sulfur remain in the Strait, awaiting transport. Furthermore, damage to gas fields and refineries in Qatar and the UAE caused by the conflict may keep their medium-term export volumes below pre-war levels.

II. Global Sulfur/Sulfuric Acid Supply Disruptions: A Triple-Layered Crisis and Widening Deficit

Approximately 98% of global sulfur is a byproduct of oil refining and natural gas desulfurization; its supply elasticity is extremely low, meaning production cannot be adjusted as flexibly as that of primary products. The Middle East accounts for about 25% of global sulfur production and roughly 45% of global seaborne trade volume. The blockade of the Strait of Hormuz effectively choked off nearly half of global seaborne trade, exposing the structural vulnerability of the global sulfur supply chain—specifically, its over-reliance on a single production region and maritime corridor.

The essence of this supply crunch lies in a "triple-layered" crisis: First, a physical cutoff—the blockade of the Strait of Hormuz severed Middle Eastern supply sources, stalling nearly half of global seaborne trade. Second, policy-driven blockades—export bans from Russia, Kazakhstan, and Turkey compounded the issue, blocking alternative sources and further narrowing the volume of globally tradable sulfur. Third, a collapse in production capacity and inventories—war-related damage to Middle Eastern facilities slowed the resumption of output, while global port inventories fell to a ten-year low, completely eliminating any buffer capacity. The simultaneous occurrence and mutual reinforcement of these three constraints—tightening supply from every direction—constitute the core driver of current market trends. PART 01

Disruption of Middle Eastern Supplies Forces Restructuring of Global Trade Flows

During the blockade, the export of sulfur from the Middle East came to a near-standstill. Sulfur imports from the Middle East accounted for 56.2% of China's total imports, with domestic reliance on imported sulfur exceeding 50%. As Middle Eastern sources represent half of China's total imports, the blockade caused a sharp drop in supply, leading to a widening supply gap.

The blockade drove up official selling prices (OSP) from Middle Eastern suppliers: in June, ADNOC’s (UAE) OSP was adjusted to $860/ton FOB, while Qatar’s QSP and Kuwait’s KSP were raised to $805/ton FOB; in July, ADNOC’s price rose further to $1,000/ton FOB (a 16.3% increase in a single month), and QSP was raised to $890/ton FOB. These figures set new record highs not seen since 2008.

Even after navigation resumed in the Strait of Hormuz, the pace of supply recovery remained far below expectations.

PART 02

Russia Extends Export Ban; Kazakhstan Follows Suit

Russia: On June 25, 2026, the Russian government formally signed a decree extending the temporary ban on industrial sulfur exports through December 31, 2026. The ban was originally implemented on November 1, 2025, and has been extended multiple times since. Domestic sulfur output has plummeted; at Gazprom’s Astrakhan gas field—which has an annual capacity of 4.8 million tons—only one production line is operational, while the Orenburg facility (1.55 million tons annual capacity) was damaged in a conflict-related incident on June 24.

Kazakhstan: According to market reports, on June 26, Kazakhstan’s Ministry of Energy signed Order No. 1363, imposing a total suspension of sulfur exports effective June 27. The ban remains in effect "until further notice," with exemptions granted only for sulfur shipments destined for Russia. Kazakhstan exported approximately 4.6 million tons of sulfur in 2025, and the ban has directly impacted key buyers such as Morocco. Morocco’s OCP imports approximately 2.5 million tonn of sulfur annually from Kazakhstan—accounting for nearly 44% of its total imports—making the impact of the ban particularly direct.

Turkey: Implemented a sulfur export ban starting April 7, extending through the end of the third quarter.

PART 03

Canada: A Key Alternative Supplier Seeing Growth in Both Volume and Price

Amidst the blockade of the Strait of Hormuz and restrictions on exports from Russia and Kazakhstan, Canada has emerged as a crucial, flexible supplier in the global sulfur trade. Export data clearly reflects this structural shift:

In 2025, Canadian sulfur exports saw increases in both volume and value; tonnage rose 40.7% year-on-year to 4.25 million tons, while the total value hit a record high of US$1.53 billion. In the first four months of 2026, export value reached US$1.049 billion, with an annualized volume of approximately 5.22 million tons, suggesting the full-year value is poised to set a new record.

Exports are highly concentrated in the provinces of Alberta and British Columbia, which together account for over 95% of the national total. The FOB Vancouver price surged from approximately US$500/ton in January 2026 to US$825–950/ton in April—an increase of over 80%.

PART 04

China’s Imports Plummet; Inventories Hit Decade Low

The import sector bore the most direct impact. In May 2026, China’s sulfur imports totaled 268,300 tons, a sharp year-on-year decline of 66.41%. Cumulative imports from January to May stood at 2.1154 million tons—down 51.44% from the same period in 2025—effectively halving the total import volume. The May figure of 268,380 tons marked the second-lowest monthly import volume in nearly 20 years. The average import price soared to US$798.96/ton.

The structure of import sources underwent a drastic shift, with the Middle East's share cut in half. The composition of China's sulfur import sources was fundamentally restructured between January and May. The combined share of the four traditional Middle Eastern suppliers (Saudi Arabia, the UAE, Qatar, and Kuwait) plummeted from over 40% in the same period of 2025 to less than 20%. Forced diversification of alternative sources: Oman surged to the top spot with 541,000 tonnes (accounting for 20.1%), while South Korea (485,000 tons, 18.0%), Japan (316,000 tonnes, 11.8%), and Canada (286,000 tons, 10.6%) emerged as key supplementary sources. In April, imports from Iran reached 62,400 tons—the first large-scale direct arrival since the conflict began—indicating that some shipments had successfully transited the strait. In May, the combined share of imports from Oman, South Korea, and Japan reached 86.8%; this rebound in source concentration reflects an insufficient supply of alternative cargoes.

Port inventories collapsed in tandem. As of June 23, total national port inventories of sulfur stood at 748,800 tons, a new low since July 2017. By July 3, national port inventories had fallen to 727,900 tons, a year-on-year decline of 68.81%. Based on May inventory levels, sulfur stocks could be depleted by August.

PART 05

Indonesian Imports: Rigid Demand Drives Volume Growth; Middle East Remains Key, Though Supply Patterns Evolve

From January to April 2026, Indonesia’s cumulative sulfur imports totaled approximately 1.23 million tons. Imports for May alone were projected to exceed 350,000 tons, reflecting the continued rigid procurement needs of HPAL plants despite high sulfur prices.

Four Middle Eastern nations (Oman, Saudi Arabia, the UAE, and Qatar) remain the core suppliers, though their combined share has dropped significantly from the pre-conflict level of over 70%. Imports are highly concentrated at three major ports—Weda Bay, OBI Island, and Morowali—catering to the raw material requirements of HPAL plants operated by companies such as Tsingshan, Huayou, and Lygend.

Sulfuric acid imports grew in parallel. Indonesia’s cumulative sulfuric acid imports from January to May totaled approximately 449,000 tons—a sharp year-on-year increase—reflecting a shift by HPAL enterprises toward sulfuric acid as a substitute amidst tight sulfur supplies. The primary sources were South Korea and Japan, aligning with Asia-Pacific trade flows monitored via SMM sulfuric acid (CFR Indonesia) price points.

Indonesia relies on imports for approximately 75%–80% of its sulfur supply. Sulfur is a key auxiliary material for producing Mixed Hydroxide Precipitate (MHP) via the High-Pressure Acid Leaching (HPAL) process in Indonesia, with a consumption rate of 10–12 tons per ton of nickel produced. HPAL plants typically hold sulfur inventories sufficient for only 1–2 months of consumption.

PART 06

Sulfuric Acid Supply: A Combination of Concentrated Maintenance and Forced Production Cuts

The sulfuric acid supply sector is also facing dual pressures leading to contraction. In the first half of 2026, producers of sulfuric acid derived from elemental sulfur (sulfur-based acid) continued to suffer deep losses; in East China, high total production costs could not be covered by market prices, resulting in losses generally exceeding 350 RMB/ton. In June, the industry's operating rate dropped to approximately 60% due to a "double supply contraction" caused by concentrated maintenance at smelter-acid plants and cost-price inversion for sulfur-based acid. With multiple units in Central and East China undergoing maintenance, spot market availability tightened, and inventories at acid plants remained low.

III

Global Sulfur/Sulfuric Acid Demand Disruptions: High-Price Suppression and Structural Divergence

PART 01

Fertilizer Sector: Supply Security vs. Profit Collapse

The phosphate fertilizer industry is squeezed between "inelastic demand" and a "collapse in profits." Sulfur costs surged from a normal range of 30%–35% of total phosphate fertilizer production costs to over 130%, pushing the industry into a state of widespread loss. In the first half of the year, capacity utilization rates fell to lows of around 40% for monoammonium phosphate (MAP) and only about 30% for diammonium phosphate (DAP), with the industry remaining deeply unprofitable.

While China's phosphate fertilizer exports were restricted by policies aimed at ensuring domestic supply, and domestic consumption remained steady, profits were entirely eroded by raw material costs.

PART 02

Chemical Sector: Cost Pass-Through Hindered, Operating Rates in Decline

Driven by cost pressures, the titanium dioxide industry underwent multiple rounds of price hikes. The SMM China Titanium Dioxide Index rose steadily from approximately 13,778 RMB/ton at the start of the year, climbing above 15,000 RMB/ton by mid-to-late March; the peak price for the first half of the year was reached in mid-to-late June at approximately 16,457 RMB/ton. Notably, the price of rutile-grade titanium dioxide rose significantly from approximately 13,500 RMB/ton at the start of the year to a range of 15,500–16,500 RMB/ton in June. However, downstream demand remained sluggish, and operating rates across the titanium dioxide industry weakened overall, hindering the pass-through of costs.

PART 03

New Energy Sector: The Sole Bright Spot, Though Limited in Scale

Lithium iron phosphate (LFP) for new energy applications is one of the few sectors with relatively stable demand; however, its volume is insufficient to offset the collapse in traditional demand. Estimates indicate that new LFP production capacity coming online between 2025 and 2026 will generate an additional annual sulfur demand exceeding 3.3 million tons, highlighting the significant long-term demand growth for sulfur within the new energy sector.

PART 04

Indonesian Nickel Hydrometallurgy: The Sector Most Directly Impacted by Cost Shocks

HPAL (High-Pressure Acid Leach) nickel smelting in Indonesia represents a new growth engine for sulfur demand. In the first half of June, the price of sulfur (CIF Indonesia) held steady at $1,250–$1,300 per ton; given that producing one ton of nickel in MHP (Mixed Hydroxide Precipitate) form consumes 10–12 tons of sulfur, the marginal cost of hydrometallurgical processing has risen sharply. Indonesian MHP production stood at approximately 29,900 tons of contained nickel in June, a significant drop from the January peak of 42,000 tons, reflecting the ongoing dampening effect of high sulfur prices on production.

PART 05

Overall Assessment of Demand

In summary, demand destruction has spread from the fertilizer sector to the chemical and nickel smelting sectors; however, the scale of supply contraction remains far greater than that of demand shrinkage. In the short term, demand is unlikely to be the primary driver of a downward trend in prices.

IV

Overall Price Review: A Complete Cycle of Surging, Peaking, and Pulling Back

Sulfur (Domestic): The price of sulfur (EXW Shandong) was approximately 3,910 RMB/ton at the beginning of the year. Prices surged rapidly following the outbreak of conflict in late February: standing at 4,150 RMB/ton in early March, they broke through 6,500 RMB/ton in early April, reached 8,075 RMB/ton on June 5, and hit a historical peak of 10,053.5 RMB/ton on June 12—an accumulated increase of approximately 157% since the start of the year. News of a truce in mid-June triggered a reversal in market sentiment, causing prices to fall sharply. On June 26, SMM sulfur (EXW Shandong) was quoted at 7,800–8,607 RMB/ton, a drop of nearly 3,000 RMB/ton from the peak. By July 3, prices had rebounded to 9,000–9,300 RMB/ton.

Sulfur (International): SMM sulfur (CIF Indonesia) started the year at approximately $563/ton, hit a historical high of $1,250–1,300/ton on June 10 (a rise of over 126% in six months), and was subsequently lowered to $1,100–1,200/ton starting June 25.

Sulfuric Acid (Domestic): The SMM China copper smelting acid index climbed from 903 RMB/tone in mid-January to a historical peak of 1,751 RMB/tone on June 26; the spread between the low and high points was 848 RMB/tone, representing a six-month increase of approximately 94%. The average value of the SMM China copper smelting acid index for June was 1,698.25 RMB/tone, up 36 RMB/tone from the May average of 1,662.25 RMB/ton.

Sulfuric Acid (International): SMM sulfuric acid (CFR Indonesia) began the year at approximately $150/ton and was quoted at $410–445/ton (average $427.5/ton) on June 26, marking a six-month increase of approximately 185%. SMM sulfuric acid (FOB South Korea) was quoted at $370–385/ton on June 26.

First Divergence in June: Following the signing of the US-Iran agreement, sulfur prices fell sharply, yet sulfuric acid prices did not follow suit—marking the first significant divergence in their price trends for the year during late June. The primary reason is the continued tightening of spot market liquidity caused by concentrated maintenance at smelter-based acid plants across multiple regions during the first half of the year.

V.

Outlook for the Second Half of the Year: Wide-range fluctuation at high levels; focus on four key variables.

Sulfur: The market is caught in a fierce tug-of-war between "strong current realities" (supply shortages) and "weak expectations" (incoming shipments and poor demand). In the short term, low inventory levels and cost support remain in place. As of early July, national port inventories of sulfur stood at just 790,000 tons—a drop of over 66% (or 1.578 million tons) compared to the same period last year. However, following the US-Iran agreement, 800,000 to 1 million tons of sulfur currently held up in the Persian Gulf are expected to arrive at ports en masse during the latter half of July; this represents the most significant bearish factor. Supply constraints—such as the extension of Russia's export ban through the end of the year and the six-month timeframe required for the recovery of Middle Eastern oil and gas facilities—will continue to limit the downside.

Sulfuric Acid: Cost-side support remains, but the tug-of-war between supply and demand is expected to intensify. Prices remained stagnant at high levels from late June through early July, though the price center may shift downward in the latter part of the month. While high sulfur costs provide a floor, downstream resistance to high prices for phosphate fertilizers and titanium dioxide is mounting, leading to slower purchasing and accumulating risk of a market pullback.

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