"Black swan" events drove the sulfur market to repeatedly hit record highs in H1, but multiple disruptions in H2 made prices difficult to sustain.

Introduction: The domestic sulfur port spot market has experienced a volatile upward trend, with its overall price fluctuation trajectory aligning with changes in domestic and international supply-demand dynamics and market sentiment. Currently, the instability in the Middle East geopolitical situation, coupled with the continuity of domestic policies and uncertainties surrounding downstream new production projects, paints a less optimistic outlook for the sulfur market in the second half of the year.

Taking the mainstream granular price at Zhenjiang Port as an example, the average price from January to June 2026 was 6,106 RMB/ton, an increase of 3,929 RMB/ton year-on-year, representing a surge of 180%. Such performance is naturally inseparable from the impact of the Middle East geopolitical situation. Although early in the year, broadly higher official Middle East prices, the return of demand from Indonesia, and concentrated replenishment by domestic merchants drove a clear upward trend in both international and domestic sulfur markets. However, after prices rose, domestic merchants began to develop profit-taking and wait-and-see sentiments. Downstream enterprises only released limited rigid demand, leading to a stalemate and struggle between supply and demand, which caused sulfur prices to soften. Yet, continuous consolidation failed to alleviate merchants' market concerns. As the Lunar New Year holiday approached, merchants gradually withdrew from the market for rest, causing the market to further weaken into consolidation. Even after the holiday ended, the slow pace of work resumption continued to drag down spot market prices.

Just as the port spot market was struggling in a dilemma, the escalation of the Middle East geopolitical conflict directly led to traffic disruption in the Strait of Hormuz, tightening the circulation of international sulfur resources. Stimulated by this, traders and end-users in domestic ports carried out concentrated replenishment operations, pushing prices up sharply and frequently hitting new periodic highs. Although the market experienced periodic consolidation afterward, under the continued blockade of the relevant strait, China faced a situation of low volume and high prices for imported USD-denominated resources, rapidly declining port resource inventories, and timely procurement by merchants based on demand. Consequently, port market prices naturally continued to climb. Entering June, major domestic sulfur resources adopted a targeted supply assurance strategy. This narrowed procurement options for other chemical and new energy raw materials. Coupled with active follow-up replenishment by long-term contract merchants, spot prices at the port quickly reached "five digits" and set a historical high. However, the sudden signing of a US-Iran Memorandum of Understanding significantly cooled the domestic spot trading atmosphere. As concerns over supply risks notably diminished, the trading sentiment shifted sharply, leading to clear divergence between industrial and commercial parties. After a brief period of stalemate and waiting, news emerged that several cargoes of sulfur resources had passed through the Strait of Hormuz. Holders gradually adjusted their sales strategies, leading to a rapid decline in prices.

Looking back at the performance of the domestic sulfur spot market in the first half of recent years, upward trends have dominated. From the pattern of changes in amplitude—from large to small, and then from small to large—one can discern the industry's rumored "big three-year, small three-year" price cycle. Of course, as a product with a clear domestic supply deficit requiring imported resources, its price trend is naturally inseparable from changes in the international market. This has been continuously verified since the fourth quarter of last year, and entering 2026, the "buff" effect of the geopolitical tension has been maximized.

In the first half of 2026, the international sulfur market showed a strong trend again after a period of consolidation. The Middle East geopolitical conflict and its escalation exacerbated the supply shortage in the international sulfur market, thereby stimulating market prices to continually surge. For instance, the market price in the Middle East, a major supply region, rose from FOB $520/ton at the beginning of the year to a high of FOB $920/ton; Vancouver rose from FOB $495/ton to a high of FOB $1,150/ton. In major demand regions, Morocco rose from CFR $467/ton at the start of the year to a high of CFR $1,190/ton; the Indonesian market was relatively restrained, rising from CFR $547/ton to a high of CFR $1,100/ton; the Chinese market was more subdued, with its high near CFR $1,075/ton. Of course, both international and domestic markets have always fluctuated within the framework of supply-demand logic.

From the demand data perspective, due to the impact of the Middle East geopolitical conflict, countries like Indonesia, Morocco, Brazil, and India all showed a clear year-on-year decline in resource imports in the international market. Specifically, Brazil's sulfur imports in the first half of 2026 were approximately 709,000 tons, a year-on-year decrease of about 42.00%. Resources from the Middle East accounted for only 45,500 tons, or 6.42% of total imports (compared to about 46.00% in the same period of 2025). Indonesia's sulfur imports from January to May 2026 were about 1.51 million tons, a year-on-year decrease of about 30.00%. The year-on-year declines in imports from its Middle Eastern trade partners were: Kuwait ~69.00%, UAE ~56.00%, Qatar ~54.00%, Saudi Arabia ~41.00%. Imports of sulfur from Canada increased to about 196,000 tons, up about 17.00% year-on-year. India's sulfur imports from January to April 2026 were about 556,000 tons, a year-on-year decrease of about 25.00%. Imports from its Middle Eastern partner Qatar dropped by about 40.00% year-on-year, while imports from Canada increased to about 108,000 tons. Indonesia's sulfur imports from January to April 2026 were about 1.23 million tons, a year-on-year decrease of about 20.00%. Sulfur exports from its main trading partners UAE and Saudi Arabia to Indonesia declined by 44.00% and 25.00% respectively year-on-year. However, unlike the other demand countries mentioned, Indonesia's sulfur imports from Canada also showed a year-on-year decline, totaling about 74,200 tons, a drop of about 56.00%.

From a global market perspective, the primary driver for the continuous surge in international sulfur prices in the first half of 2026 was clearly different from past demand-side explosions. Instead, it was the Middle East geopolitical conflict that hindered the export of local resources due to shipping disruptions, creating a supply tightening situation, thereby pushing international market prices consistently higher. Rigid demand consumption played a supporting role.

Currently, the uncertainty of the Middle East geopolitical situation remains the core variable affecting the domestic sulfur spot market in the second half of the year. Against this unresolved backdrop, the response of Indonesia will inevitably drag on and influence international sulfur market prices. Thus, it is highly likely that international sulfur prices will not decline rapidly. This will continue to impact the arrival pace and cost of imported resources for China. Domestically, whether phosphate fertilizer and sulfuric acid export policies are relaxed will directly affect the supply-demand pattern of sulfur. Combined with the actual implementation progress of downstream new production projects and the duration of the "Three Major Oil Companies'" sulfur supply assurance policy, these factors will continuously influence market resource circulation and the operational flexibility of demand sides. Comprehensive analysis suggests that the Middle East geopolitical friction is unlikely to quickly resolve differences and reach a substantive reconciliation. Russia's export ban and Indonesia's release of rigid demand will serve as a drag on any weakening trend in the international sulfur market. However, domestic downstream rigid demand support is not solid. Coupled with uncertainties regarding policy duration and downstream new production project plans, the momentum for price increases is insufficient. Thus, simply relying on sudden fluctuations from the Middle East geopolitical situation to generate periodic rebounds may not prevent an overall steady downward trend in sulfur prices.