Full Analysis: Sulfur Price Surge and Its Impact on the Silica Industry Landscape & Countermeasures Lead

Full Analysis: Sulfur Price Surge and Its Impact on the Silica Industry Landscape & Countermeasures

Lead

Since 2026, domestic spot sulfur prices have continued to rise sharply, with a maximum intra-month gain of 44% during the year. By the peak in June, the mainstream transaction price of solid sulfur at Zhenjiang Port climbed to a high of 11,600 yuan per ton, marking a cumulative increase of over 210% from around 3,800 yuan per ton at the beginning of the year, and a year-on-year peak increase of more than 217%. It has become the most volatile commodity in the upstream chemical industry chain. This round of price hike is not driven by a single factor, but by the resonance of supply disruptions from geopolitical conflicts, expanding demand from the new energy sector, and widening global supply-demand gaps. Its cost transmission effect is gradually penetrating downstream segments such as precipitated silica, accelerating the reshaping of the industry landscape and changes in global trade logic.

I. Root Causes of the Surge: Rigid Supply Constraints and Demand Growth Resonance

The industrial attribute of sulfur determines its inherent lack of supply elasticity: 98% of global sulfur output is recovered as a by-product of oil refining and natural gas processing, with capacity tied to oil and gas production planning and unable to expand rapidly in response to price increases. Since 2026, escalating geopolitical conflicts in the Middle East have long disrupted navigation in the Strait of Hormuz, which carries about 40% of the world's seaborne sulfur trade. This has directly led to a sharp contraction in China's sulfur imports: in the first half of 2026, China's cumulative sulfur imports reached 2.261 million tons, a year-on-year plunge of 57.7%. In June alone, imports were only 147,000 tons, a year-on-year drop of 85.1%, hitting the lowest monthly import volume in 20 years. Meanwhile, domestic port sulfur inventories continued to deplete, falling to a low of more than 700,000 tons, the lowest level in nearly a decade, leaving spot market supplies extremely tight.

On the demand side, three pillars provide strong support: First, the phosphate fertilizer industry (accounting for 52% of sulfur consumption) underpins rigid demand, with autumn fertilizer preparation and export orders supporting stable sulfuric acid demand. Second, the explosive growth of the new energy sector has driven massive sulfuric acid consumption in lithium iron phosphate (LFP) production and Indonesian laterite nickel hydrometallurgy, with each ton of hydrometallurgical nickel consuming 11.7 tons of sulfur, becoming the core growth driver of demand. Third, copper smelters, enjoying high profits amid elevated copper prices, have ramped up production and competed for sulfuric acid, further squeezing the supply available for the chemical industry. Amid supply-demand mismatch, institutional estimates put the global annual sulfur shortage at approximately 5.13 million tons, driving prices up rapidly.

II. Price Trend Outlook: High-Level Volatility in the Short Term, Downward Central Trend in the Medium-Long Term

Short Term (Q4 2026): High-Level Consolidation, Limited Deep Correction

Sulfur prices will remain high in the fourth quarter, supported by three core factors: geopolitical conflicts show no sign of easing, and the maritime supply bottleneck will not be resolved in the short term; port inventories are at historic lows with a long restocking cycle; the fourth quarter is the peak season for winter fertilizer preparation in China's phosphate fertilizer industry, with strong rigid demand support.

However, room for further sharp price increases is also limited. High prices have begun to erode downstream demand: some phosphate fertilizer plants and battery material manufacturers have successively cut production, and the operating rate of China's battery material industry has dropped by 38%. Meanwhile, alternative processes such as phosphogypsum-based sulfuric acid production have significant economic viability (the alternative route becomes cost-competitive when sulfur prices exceed 1,800–2,400 yuan per ton) and will gradually divert part of the demand. It is estimated that the domestic spot sulfur price will run in the range of 7,500–10,500 yuan per ton in the fourth quarter.

Medium-Long Term (2027–2030): Price Center Shifts Down, Unlikely to Return to Historic Lows

With the gradual release of sulfur capacity supporting global oil and gas refining, the fading of geopolitical conflict premiums, and the capacity expansion of alternative processes such as smelter acid and phosphogypsum-based acid, the sulfur price center will gradually move down after 2027. It is expected that the medium-long term operating range will be 4,000–6,000 yuan per ton. However, affected by the global energy transition and slowdown in oil and gas capital expenditure, the underlying logic of insufficient sulfur supply elasticity remains unchanged, and prices are unlikely to return to the long-term low levels seen before 2024.

III. In-Depth Impacts on the Precipitated Silica Industry

Sulfuric acid is the core raw material for precipitated silica, and sulfur is the core cost component of sulfuric acid. The sulfur price surge will reshape the silica industry from multiple dimensions including cost, industry structure and trade:

1. Systematic Upward Shift in Cost Center

Sulfuric acid accounts for a high proportion of the production cost of precipitated silica. The sharp rise in sulfur prices directly pushes up raw material costs across the industry. Small and medium-sized enterprises face more significant cost pressure and shrinking profit margins due to insufficient scale and weak bargaining power. Leading enterprises can hedge part of the pressure through long-term contract pricing and integrated layout, but the upward shift of the industry-wide cost center is an established trend.

2. Further Solidified Product Structure Differentiation

The industry's differentiated pattern of "oversupply and fierce competition in general grades, tight supply and strong profitability in high-end grades" will further intensify. General-grade silica faces weak downstream bargaining power and poor cost transmission, putting enterprises in a dilemma: raising prices leads to order losses, while holding prices leads to losses. In contrast, high-end silica categories such as green tire grade, fumed silica, and food & pharmaceutical grade have low downstream price sensitivity and high certification barriers, with stronger profit resilience, and will become the core support for enterprises to navigate cycles.

3. Accelerated Industry Concentration Toward Leading Players

Under cost pressure, the living space of small and medium-sized tail enterprises continues to narrow, accelerating industry consolidation. Leading enterprises will further seize market share by virtue of scale effects, integrated industrial chain layout and high proportion of high-end products, driving continuous improvement of industry concentration.

4. Rising Substitution Value of China's High-End Products in Export Market

Against the backdrop of widespread global sulfur price hikes, overseas silica enterprises also face cost pressure, further highlighting the cost-performance advantage of China's high-end silica products. Enterprises with full sets of international certifications such as KOSHER, HALAL and Indonesian BPJPH will gain stronger pricing power and market competitiveness in global trade, opening a window for high-end product exports.

IV. Suggestions for Enterprise Operation and Foreign Trade Risk Control

Facing the drastic fluctuation of sulfur prices, silica enterprises can carry out risk management and strategic layout from multiple dimensions:

1. Pricing: It is recommended to add sulfur/sulfuric acid price linkage clauses in foreign trade orders, set price adjustment thresholds, and transmit raw material fluctuation risks to downstream customers.

2. Monitoring: Establish a weekly tracking mechanism, focusing on three core indicators: port sulfur inventory, import arrival volume, and sulfuric acid plant operating rate.

3. Raw material procurement: Arrange long-term contracts for price locking reasonably, and explore diversified raw material channels such as smelter acid and phosphogypsum-based acid to reduce dependence on the single sulfur-based route.

4. Product layout: Accelerate certification and capacity layout of high-end products, increase the proportion of food-grade, pharmaceutical-grade and high-end industrial-grade products, and strengthen profit resilience.

5. Inventory management: Control raw material and finished product inventory reasonably according to order rhythm, avoid blind stockpiling at high price levels, and guard against the risk of price correction.