Sudden Turmoil in the Strait of Hormuz Is Reshaping the Global Phosphorus Chemical Landscap

SMM News, March 9:

Key points: Geopolitical conflict in the Middle East led to the closure of the Strait of Hormuz, cutting off the global sulphur supply chain (China’s import dependence exceeds 50%, with the Middle East accounting for 56%). Sulphur prices surged to 4,395 yuan/mt, directly pushing up phosphate fertiliser costs. Rigid demand for spring ploughing provided a floor, but China’s policies to ensure supply and stabilise prices capped phosphate fertiliser gains; enterprise profits came under pressure, and exports await clearer policy signals.



As geopolitical conflict in the Middle East continues, how will it affect the phosphorus chemical industry? The following article provides a brief overview.
The importance of phosphorus resources has been referenced in policy in both China and the US. (1) In November 2025, the U.S. Geological Survey (USGS) included phosphates for the first time in the 2025 Final List of Critical Minerals. On February 18, 2026, the Trump administration further invoked the Defense Production Act to sign an executive order listing elemental phosphorus and glyphosate herbicides as critical materials for national defense. (2) China had already included phosphate ore in the national catalogue of strategic minerals in 2016, ushering in an era of comprehensive controls. In December 2023, MIIT and seven other ministries jointly issued the Implementation Plan for Promoting Efficient and High-Value Utilisation of Phosphorus Resources, for the first time positioning phosphate ore as a strategic non-metallic mineral resource.
The Strait of Hormuz closure triggered by geopolitical conflict in the Middle East has directly affected the global phosphorus chemical industry market.
I. Analysis of Transmission Pathways for the Phosphorus Chemical Industry Under the Fog of War
On February 28, 2026, Iran’s Islamic Revolutionary Guard Corps announced a ban on any vessels passing through the Strait of Hormuz, meaning this global energy “lifeline” was effectively in a closed state; this was akin to the lockdowns, port closures, and flight freezes seen during the pandemic, with liquidity nearly at a standstill and supply-demand imbalances in globalised markets intensifying. The Strait of Hormuz carries about 20% of global oil consumption and 25% of seaborne oil trade. For the phosphorus chemical industry chain, the impact of this geopolitical storm is transmitted to global markets mainly through sulphur, a key raw material.
The risk of a break in the core raw material supply chain rose sharply. Sulphur mainly comes from oil and gas desulphurisation processes, so the closure of the Strait of Hormuz not only disrupted oil trade but also meant that sulphur exports attached to the oil and gas industry chain would fall into stagnation. China’s import dependence on sulphur exceeds 50%, with Middle Eastern supply accounting for as much as 56.2%, making it the most significantly affected consuming country in this round of conflict. Iran is the world’s third-largest sulphur exporter, accounting for 5-10% of global trade volume, and is also China’s second-largest source of sulphur imports, at about 31%. The conflict led to shutdowns at Iranian refineries and stalled loading at Bandar Abbas, driving Iran’s short-term supply to essentially zero. Other sulphur-producing countries in the Middle East, considering risk aversion and profits, simultaneously restricted shipments and raised prices sharply, causing global effective sulphur circulation to drop by more than 10%. Meanwhile, Russia has shifted from a net sulphur exporter to a net importer and cannot fill the Middle East supply gap, resulting in a rigid contraction in global supply.
Shipping disruptions further tightened supply. As the key chokepoint for Middle Eastern sulphur exports, the Strait of Hormuz handles more than 30% of global seaborne sulphur volumes, and traffic has now largely stalled due to the conflict. Logistics bottlenecks directly prevented Middle Eastern cargoes from arriving on schedule, further increasing the domestic market’s reliance on spot cargo. At the same time, shipping costs surged sharply: vessels were forced to detour around the Cape of Good Hope, extending voyages by 15-20 days, while marine insurance premiums jumped by more than 300%, further pushing up landed costs; international sulphur landed costs have exceeded 4,300 yuan.
The board secretary of Liuguo Chemical explicitly noted that if the Strait of Hormuz remains closed for an extended period, fertiliser trade in the Middle East would essentially come to a halt. For China, in theory the war would positively affect China’s fertiliser exports, but current policy prioritises domestic food security, and export volumes will depend on national policy before becoming clear.
II. Market Status and Fundamentals: The Tug-of-War Between Cost Push and Rigid Demand
Before the war shockwave arrived, the domestic phosphorus chemical market was already in a tight balance.
Cost side, sulphur prices had already seen a sharp jump. SMM data showed that as of March 5, 2026, sulphur prices rose from 4,050 yuan/mt before Chinese New Year to 4,395 yuan/mt, a cumulative increase of 345 yuan/mt.
Supply side, China’s phosphorus chemical industry faces long-term environmental protection constraints and capacity controls. Demand side, this is a critical period for fertiliser preparation for spring ploughing, and phosphate fertiliser production has created concentrated rigid demand for sulphur, with downstream enterprises showing strong willingness to restock. In addition, demand in new energy sectors such as LFP and Indonesia’s wet-process nickel smelting continued to grow, and global sulphur demand is expected to increase by about 3 million mt in 2026.
According to SMM analysis, the essence of this round of iron phosphate price increases for LFP precursor is cost-driven passive repricing rather than demand boost-driven profit improvement. The sulphur–phosphoric acid–iron phosphate cost pass-through chain is clear: higher sulphur prices drove phosphoric acid higher, lifting iron phosphate costs accordingly, and most of the price increase was ultimately absorbed by the raw material side.
III. Price Trend Outlook for Core Phosphorus Chemical Products
Against the backdrop of ongoing geopolitical conflict in the Middle East and disrupted shipping through the Strait of Hormuz, price trends for phosphorus chemical products show the following characteristics:
Short term (March 2026): sulphur prices will fluctuate at highs, with the geopolitical risk premium as the core driver. Rigid demand for spring ploughing downstream supports phosphate fertilisers; monoammonium phosphate (MAP) and diammonium phosphate (DAP) prices remain relatively stable under policy intervention, but enterprise profits are under pressure. Phosphoric acid prices will continue to rise on cost pass-through.
Medium term (2026 Q2): if the conflict continues, the restructuring of the global sulphur supply chain will lead to a permanent upward shift in the phosphate fertiliser production cost curve. The tug-of-war between China’s policies to ensure supply and stabilise prices and export controls will intensify; if the state issues temporary export quotas, domestic prices will converge with high international prices.
Full year 2026: an upward shift in the cost centre of the phosphorus chemical industry has become a foregone conclusion. The trend of revaluing sulphur as a strategic raw material is becoming more pronounced, and enterprises with high resource self-sufficiency and deep industry chain integration will gain relative advantages. Continued release of demand in the new energy sector will further consume phosphorus resources and strengthen price support.

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