SunSirs: Volatile Sulfur Prices: Mitigation Strategies for Phosphorus & Lithium Battery Material Enterprises

Analysts said that from the supply side, overseas constraints have not been fully lifted, and the weak traditional demand in the current quarter has exerted conductive pressure on the spot market. Meanwhile, the targeted supply guarantee by the "three major state-owned oil companies", the export restrictions on sulfuric acid, coupled with the moderate substitution of smelting acid in some regions, have deprived the spot market of the driving force for the rapid price increase caused by the previous tight supply.

In the first half of this year, the price of sulfur rose sharply, and the performance of relevant listed companies also improved significantly. On the evening of July 8th, Shanghai Yashi disclosed its performance forecast, expecting the net profit in the first half of 2026 to be 103 million to 125 million RMB, a year-on-year increase of 406.73% to 514.97%. The reason is directly attributed to the simultaneous increase in volume and price of sulfur products.

In July, the domestic sulfur market lost the momentum it had from May to June. Even though the resources available for import schedules are relatively limited and port inventories remain at low levels, spot prices have lost their previous upward momentum.

According to the data from the Jigang Business News Agency, on July 8th, the benchmark price of sulfur on the Jigang Business News Agency stood at 8,669.00 RMB per ton, a decrease of 2.98% compared with the beginning of this month, and a drop of approximately 26% from the high in early June.

Si Bin, an analyst at Longzhong Information, stated that from the supply side, overseas restrictions have not been fully lifted, and sluggish traditional demand in the current quarter has transmitted downward pressure to the spot market. Meanwhile, targeted supply guarantees from the three major oil companies, export restrictions on sulfuric acid, alongside moderate substitution of smelter acid in some regions, have stripped the spot market of the momentum for sharp price hikes that stemmed from tight supply earlier.

Demand-side resource selection and deployment, as well as adjustments to the start-up of relevant equipment, have also continued to dilute the confidence in price hikes. At the end of last year, the phosphate fertilizer industry was trapped in the predicament of cost inversion; the production of monoammonium phosphate and diammonium phosphate by purchasing sulfur externally both yielded negative profits and the loss margin widened. Therefore, relevant factories had to adopt negative equipment disposal methods and deployment methods for other resources to cope with the unfavorable situation of high sulfur costs. Combined with the traditional off-season for fertilizer use, phosphate fertilizer enterprises have jointly formed factors that suppress the price increase of sulfur.

Si Bin believes that the current divergence of opinions within the market is mixed with the caution and hesitation of merchants, which has been continuously amplified after entering July. The arrival volume of imported resources at relevant ports and wharves in July increased compared with that in June, but was still significantly lower than that in the same period last year. At the same time, the overseas situation has made domestic merchants adopt a wait-and-see attitude. "In view of the current attitude of domestic merchants towards imported resources, the possibility and extent of the supply side quickly completing the replenishment of imported resources are relatively small, which makes the goods in stock seek a buffer zone.

Si Bin believes that the subsequent market trend will depend on the game between two forces: the settlement of stranded and newly negotiated overseas resources and the release of downstream rigid demand. Before the outcome is finalized, fluctuations in market sentiment may drive the market to continue to fluctuate.

Another industry insider also stated that it is expected that the price of sulfur will maintain high-level fluctuations and a weak operation in the short term, and two core variables need to be continuously tracked in the follow-up: first, the arrival schedules and volume changes of imported sulfur ships at various ports; second, the changes in the operating rates of plants and the rhythm of raw material procurement of downstream phosphorus chemical enterprises such as monoammonium phosphate.

Faced with the high and volatile sulfur prices, downstream chemical enterprises have taken various measures to cope.

Recently, Yuntianhua, a leading phosphate fertilizer company, disclosed that its wholly-owned subsidiaries Tian'an Chemical and Environmental Technology plan to invest a total of 2.737 billion RMB to build a green demonstration project for sulfur cycle supporting new energy battery precursor materials and a demonstration project for co-producing cement from phosphogypsum and recycling sulfuric acid resources respectively.

Both projects target the same core issue: against the backdrop of the explosive growth in the energy storage industry driving up demand for upstream materials of lithium iron phosphate and the geopolitical conflicts in the Middle East pushing up sulfur prices, we will open up the chain of sulfur resource recycling and utilization, reduce reliance on external sulfur, and mitigate the adverse impacts of tight sulfur supply and sharp price fluctuations on the company's production and operations.

In the lithium battery industrial chain, changes in sulfur prices are transmitted along the entire chain of "sulfur—sulfuric acid—phosphoric acid—iron phosphate—lithium iron phosphate".

Longpan Technology previously stated that in terms of raw material procurement, the company adopts a differentiated procurement strategy. On the one hand, it locks stable and cost-effective procurement prices through long-term contracts; on the other hand, it adopts a small-batch flexible procurement model to effectively hedge against the risks brought by sharp fluctuations in raw material prices. At the same time, it combines hedging tools to avoid the risk of raw material price fluctuations and stabilize procurement costs.

Hunan Yuneng also stated that since the beginning of this year, the industry demand has maintained a high level of prosperity, and the company's production and sales are both booming. As for the impact of changes in sulfur prices, the company said it will actively take measures such as expanding procurement channels and strengthening cost control to reduce the impact of fluctuations in raw material prices.

Securities institutions pointed out that under the environment of sharp fluctuations in sulfur prices, enterprises that simultaneously control phosphate rock resources and supporting sulfuric acid production capacity can better weather this round of cost storm. Processing enterprises that rely on externally purchased raw materials and are on the right side of the cost curve will accelerate their exit from the market, and the pace of industry concentration improvement may exceed expectations. In the long run, leading enterprises with resource endowments and integrated layouts are transforming cost pressure into strategic opportunities for industry reshuffling.

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