The spring of 2026 has seen sulfur prices exceed most expectations in the phosphorus chemical industry. By end-April, mainstream granular sulfur at Zhanjiang port reached 6,700 RMB/ton, up 500 RMB month-on-month and over 80% year-to-date. Sulfuric acid prices followed suit, supported by rigid sulfur costs and concentrated maintenance of smelter acid units in May-June, leaving little room for near-term correction. This raw material surge is reshaping cost structures and competitive dynamics across the phosphorus chemical chain.
Cost Pass-Through Blocked, Margins Under Pressure
The immediate impact of raw material spikes falls on production costs. Chuanheng Co. noted internally that while it operates pyrite-based acid capacity and purchases smelter by-product sulfuric acid, sulfur-based acid remains the mainstream process, and soaring sulfur prices have significantly raised overall costs. Xingfa Group confirmed that since March 2026, price hikes in bulk commodities like sulfur and methanol have squeezed margins in some business segments.
A greater challenge lies in the phosphate fertilizer sector, where price controls for supply security limit product price increases, preventing full cost pass-through. This creates a dilemma where production may lead to losses, compressing gross margins across the board. Industry forecasts suggest that ongoing geopolitical tensions in the Middle East and rising demand from emerging sectors like nickel hydrometallurgy will keep sulfur prices elevated, making cost pressure persistent.
Leaders Build Multi-Dimensional Cost Moats
Rather than waiting for a market correction, leading firms are proactively fortifying themselves through self-sufficiency, procurement optimization, product mix adjustments, and inventory management.
Xinyangfeng employs a dual-track strategy combining pyrite-based and sulfur-based acid production. Its 1-million-ton pyrite capacity is immune to sulfur price fluctuations, while its 3-million-ton sulfur-based capacity benefits from low-cost sulfur quotas under fertilizer supply guarantees. The company is also increasing the share of specialty fertilizers, which are less sensitive to raw material costs, smoothing cyclical volatility.
Yuntianhua focuses on inventory and sourcing optimization. It holds ample strategic sulfur inventories, offering a clear cost advantage over spot purchases. Additionally, it has increased procurement of smelter acid from Yunnan's surroundings, diversifying supply sources to share the burden of high-priced raw materials and maintain full-capacity operations.
Xingfa leverages its integrated chain to push up prices of core products like glyphosate and silicones, ensuring cost pressures are passed downstream. Long-term, its phosphogypsum calcination project—producing 800,000 tons of sulfuric acid and consuming 2 million tons of phosphogypsum annually by 2027—will directly offset sulfur price impacts.
Diversified Acid Technologies Accelerate Commercialization
China's high dependence on imported sulfur leaves it vulnerable to geopolitical shocks. This price surge has turned calls to reduce sulfur reliance into concrete action. At the first-half 2026 sulfur chain industry conference, the China Phosphate and Compound Fertilizer Industry Association urged faster adoption of phosphogypsum-to-acid technology and strategic sulfur reserves, aiming to cut import dependency below 30%.
Guizhou Phosphate Group's "1468" project—the world's largest phosphogypsum decomposition unit for acid and cement co-production—now runs stably, processing 1.4 million tons of phosphogypsum annually to produce 600,000 tons of sulfuric acid and 800,000 tons of cementitious materials. Chuanheng has postponed a 400,000-ton sulfur-based acid project until prices normalize, while evaluating phosphogypsum-to-acid feasibility. Its new pyrite-based units in Guizhou and Guangxi, expected by mid-2027, will add 900,000 tons/year capacity, covering 40% of its acid needs and saving about 500 RMB per ton.
In the medium to long term, high sulfur and sulfuric acid prices are likely to persist, but this cost pressure is accelerating technological iteration and self-sufficiency. The scaling of phosphogypsum and pyrite-based routes, combined with improved strategic reserves, will gradually build a secure, green, and stable sulfur supply system.