Recently, the domestic sulfur market has shown a strong and firm operating trend, with the mainstream price of granular sulfur at Zhenjiang Port rising to 6,370 yuan/ton, just 80 yuan/ton short of the previous high. However, in stark contrast to this firm market, market sentiment is relatively complex, with a mix of caution and anxiety, presenting a contradictory situation of strong prices but weak sentiment. End-user demand remains cautious, with procurement limited to essential needs. Traders are caught in a conflicted mindset, torn between the high cost and tight supply of overseas resources, declining domestic port inventories, and tight spot resource circulation on one hand, and the risk of price declines and uncertainty lurking behind the high market prices on the other. As a result, some industry participants are struggling to make difficult decisions amidst the tug-of-war between bulls and bears. For most merchants, the future direction of the sulfur market is akin to opening Pandora's box—full of unknowns and variables—with the fog of uncertainty yet to clear.

Supply Side: Tight Overseas Supply and Import Barriers; Domestic Increases Insufficient to Fill the Gap

It is well known that the global sulfur supply is heavily dependent on the Middle East. However, since late February this year, the geopolitical situation in the Middle East has continued to escalate, disrupting shipping in the Strait of Hormuz. Exports from relevant regional countries and their resource vessels have largely come to a halt. This supply disruption has led to a situation where US dollar-denominated resources are both expensive and scarce, driving international sulfur prices to repeatedly hit new highs. As a result, rising import costs have dampened the willingness of domestic traders and downstream enterprises to purchase US dollar-denominated resources, creating a cyclical pattern of declining port inventories amid tight supply. On the domestic supply front, despite the normal operation of new production capacity added last year and the absence of unexpected maintenance at existing plants, domestic sulfur production has achieved year-on-year growth on a monthly basis. Nevertheless, it remains an indisputable fact that the supply gap persists.

Demand Side: Mainly Supported by Essential Needs; Cautious End Users Hinder High-Price Transmission

Phosphate fertilizers are the most important downstream products for domestic sulfur. Although their share of annual sulfur consumption has declined in recent years, they still occupy the top position. In the previous period, spring plowing supply guarantees helped maintain relatively high operating rates for phosphate fertilizer companies. However, as early as the fourth quarter of last year, domestic phosphate fertilizer producers had been under considerable cost pressure due to rising sulfur prices. While some companies were able to secure relatively cheaper domestic resources to balance production costs, the high sulfur prices led to cautious downstream demand, with procurement limited to essential replenishment and little willingness to build inventory. Other chemical industries, such as caprolactam and titanium dioxide, are also facing pressure from inefficient downstream cost transmission. Overall, the demand side provides a stable foundation for essential needs, but high prices curb expansion of demand, failing to generate sustained upward momentum. The support for prices is more like a "hold rather than push" scenario.

Inventory Side: Port Inventories Continue to Deplete; Tight Spot Circulation Complicates Market Sentiment

Inventory is one of the strongest supporting factors for the current sulfur market. Since the beginning of the year, domestic port inventories have declined from 1.96 million tons to around 1.33 million tons, a decrease of about 32.14%. The tight circulation of spot sulfur resources at ports further exacerbates market sentiment contradictions. The core reasons for the continuous decline in inventories can be summarized as follows: 1) High US dollar-denominated market prices curb merchants' interest in importing resources, leading to a continuous reduction in import arrivals; 2) The geopolitical situation in the Middle East disrupts shipping routes, preventing timely arrival of relevant resources; 3) Alternative resources are limited in volume and also high in price, unable to fully compensate for the shortage of Middle Eastern resources, with high freight costs further hindering supplemental supplies from other regions. In this low-inventory environment, concerns about spot shortages are escalating, yet high prices suppress purchasing enthusiasm. The strong tug-of-war between low inventories and high prices adds complexity to market sentiment.

Future Outlook: Geopolitically Driven High-Level Fluctuations; Uncertainty Continues to Ferment

Taking into account the fundamentals of supply, demand, and inventories, the domestic sulfur market will continue to maintain a high-level volatile pattern. Changes in the Middle Eastern geopolitical situation are the core variable determining market direction, with uncertainty continuing to ferment and the Pandora's box effect persisting.

In the short term, strong market support remains, with prices more likely to rise than fall. On the supply side, Middle Eastern conflicts are unlikely to subside quickly, leading to ongoing shipping bottlenecks in the Strait of Hormuz, a tight and high-priced overseas resource landscape, and sustained high import costs, providing strong support for domestic prices. On the demand side, there may be replenishment needs before the May Day holiday, and essential demand support makes a significant drop unlikely. On the inventory side, port inventories have fallen to relatively low levels, with slow recovery in subsequent arrivals, and the supportive effect of low inventories on prices remains significant. This makes a tight spot circulation pattern hard to change in the short term. The possibility of prices surging again due to geopolitical news cannot be ruled out.

In the medium to long term, market uncertainty will continue to expand, with the risk of a high-level decline gradually accumulating, accompanied by long-accumulated resistance from end users. As a result, price fluctuations may become more pronounced. Every time we review the factors influencing the future market, the Middle Eastern geopolitical situation is always unavoidable. The current conflict in the Middle East is complex, with intense competition among various parties. Whether shipping through the Strait of Hormuz can resume, and every variable, will directly impact the global sulfur supply pattern and, in turn, guide domestic market trends. If the Middle Eastern situation eases and shipping returns to normal, overseas prices will fall, reducing domestic import costs, and the gradual arrival of related resources will narrow the supply gap, putting downward pressure on sulfur prices. Conversely, if the Middle Eastern situation continues to be tense or even escalates, shipping disruptions worsen, overseas prices rise further, and domestic imports remain low, then low inventory plus essential demand support will leave room for sulfur prices to rise further, sustaining the high-level pattern.

Additionally, two potential risk points deserve close attention: First, the risk of high-price transmission. Current sulfur prices are already at historical highs, and cost pressures in end-user industries are accumulating. If high prices persist for too long, downstream phosphate fertilizer and chemical industries may cut production or shut down, and a rapid tightening of demand could in turn drag down sulfur prices. Second, the risk of a reversal in trader sentiment. Traders are currently caught in a contradictory game. If prices remain high while demand fails to keep pace, bullish confidence will gradually erode. Once sellers start offloading inventory, even in a low-inventory environment, the market could face significant price risk.

Overall, the domestic sulfur market has entered a phase of the "three highs": high prices, high volatility, and high uncertainty. Support from supply-demand-inventory fundamentals is intertwined with risk factors. Every new development in the Middle Eastern geopolitical situation will serve as a key lever influencing market direction. For industry participants, it is essential to closely monitor Middle Eastern geopolitical dynamics, overseas price trends, and port inventory changes, to view high-price conditions rationally, and to carefully manage procurement and sales rhythms.