Sulphur faces demand destruction as war disrupts supply

• Critical to agriculture and tech
• By-product of oil and gas production
• Half of annual supply uses Hormuz

Sulphur markets could slip into “demand destruction”, experts said, as the Iran war disrupts a strategic commodity critical to industries from fertilisers to semiconductors.

A little-known by-product of oil and gas, sulphur has emerged as a bottleneck in global supply chains as the Iran war squeezes an already tight market.

While the majority of Middle East production has continued to run since late February, “there have more recently been examples of facilities closing or idling in the past week”, said Peter Harrisson, principal analyst for sulphur and sulphuric acid markets at CRU Group.

The most significant disruption has been in Qatar, where Harrisson estimates that “60-70 percent of sulphur supply is down” following outages at key processing facilities.

Of the roughly 39 million metric tonnes (MT) of sulphur traded globally each year, nearly 20 million MT pass through the Strait of Hormuz, according to CRU Group.

Sulphur, a yellow, brittle solid with a distinctive odour, was once mined but is now primarily produced when refiners strip hydrogen sulphide from crude oil and natural gas, converting it into elemental sulphur.

This raw material is then processed into sulphuric acid – one of the world’s most widely used industrial chemicals – essential to fertiliser production, chemical manufacturing and semiconductors.

Any constraint on sulphur supply can ripple through food systems, as crop production depends on the fertiliser to support plant yields.

Some volumes have built up in storage, Harrisson said, as logistics and export routes have been disrupted.

But analysts CRU and Argus Media said the sulphur market was already in deep deficit in early 2026, with prices elevated heading into the conflict’s onset. 

Prices had surged sharply during the past two years, driven by strong fertiliser demand from China and rising consumption from the battery metals sector.

They warned that if disruption persists, already high prices could trigger “demand destruction”, whereby buyers are forced to delay purchases or cut consumption.

Analysts at Argus Media describe the ongoing impact on the sulphur market as “severe”.

Speaking before US President Donald Trump announced a five-day cessation of hostilities on Iranian energy infrastructure on Monday, Harrisson said limited spot market liquidity and already elevated prices have led many buyers to hold back from purchases.

However, prices have begun to edge higher, with benchmarks in China rising to around $585-$600 per tonne in recent weeks, up $70-$80 since early February, according to CRU.

Gains have been stronger in markets such as Indonesia and southern Africa. 

“Sulphur faces the issue that prices were already high and affordability was low prior to the start of the conflict,” Harrisson said. 

“Many on the consumption side of the market have chosen to wait and see what the supply impact is before rushing to buy. 

“The sulphur market was already in a deep deficit,” he added. “The loss of Middle East export volumes cannot be recovered from other origins on a short-term basis.”

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China is particularly exposed to any disruption. 

It imports about 9 million MT of sulphur annually, with more than half sourced from the Middle East, much of it used in phosphate fertiliser production. Morocco and Indonesia also rely heavily on Gulf supply.

The main alternative source of supply is Canada, which is already exporting at record rates, Harrisson said. Most Middle East volumes are moving via the Red Sea, but these are “largely already sold forward”.

“Any export disruption will result in demand deferment or destruction and is very sensitive to how long shipping remains halted,” he said.