According to Xinhua News Agency, as the US-Iran conflict escalated, the Islamic Revolutionary Guard Corps of Iran announced the closure of the Strait of Hormuz on the evening of February 28. Multiple tanker owners and traders have suspended transportation through the strait. This is the first time in recent years that the core global energy and chemical transportation channel has faced a substantive suspension. As the "throat" for global sulfur trade, this disruption will directly cut off the Middle East's sulfur export channels and have a chain impact on Indonesia's MHP production and China's phosphate fertiliser industry, which heavily rely on Middle Eastern sources.
I. Strait of Hormuz: The "Lifeline Channel" for Middle East Sulfur Exports Cut Off, Limited Alternative Route Capacity
The Strait of Hormuz is the absolute core passage for global sulfur trade, and its closure will cause a "magnitude-level" impact on Middle East sulfur exports.
1. Global Sulfur Trade Highly Dependent on This Passage
In global maritime sulfur trade, 50% of the cargo (about 20mt/year) originates from the Persian Gulf region, and must be transported through the Strait of Hormuz to the global market. The main exporting countries include Saudi Arabia, UAE, Qatar, Kuwait, and Iran.
2. All Major Export Ports Blocked
The key sulfur export ports in the Middle East—UAE's Ruwais, Saudi Arabia's Jubail and Ras al-Khair, Qatar's Ras Laffan, Kuwait's Al Zour and Shuaiba, and Iran's Bandar Imam Khomeini—all need to pass through the Persian Gulf and then the Strait of Hormuz to enter the Indian Ocean. The closure of the strait means that sulfur from these ports cannot be loaded and exported at all.
3. Extremely Limited Capacity of Alternative Routes
Although there are options to bypass the Strait of Hormuz, they are difficult to operate on a large scale:
Port of Fujairah, UAE: Located outside the strait in the Gulf of Oman, but far from the main production areas in the Persian Gulf, with high land transportation costs and limited capacity, and it is difficult to prioritize bulk sulfur during crises.
Saudi Red Sea Ports: Can be transported by land to Jeddah Port, but long-distance land transportation faces significant economic and operational challenges.
II. Indonesia MHP: Middle East Sulfur as Core Auxiliary Material Source, Logistics Disruption Will Directly Increase Production Costs
As a core production site for global new energy nickel-cobalt materials (MHP), Indonesia's HPAL projects are highly dependent on Middle East sulfur. This disruption will directly impact the production costs and supply stability of MHP.
1. High Concentration of Sulfur Imports in Indonesia
According to Indonesian customs data, over 75% of Indonesia's imported sulfur in 2025 came from the Middle East. This highly concentrated supply structure means that after the closure of the Strait of Hormuz, the core raw material source for Indonesia's MHP projects is precisely cut off.
2. Rigid demand for MHP production
According to industry averages, producing 1 mt of MHP requires about 11.7 mt of sulfur. Although recent landslides in an Indonesian industrial park have disrupted some projects, leading to low-load operations and uncertain downstream demand, other existing and new MHP projects still have a significant rigid demand for sulfur.
3. Strengthened cost transmission mechanism
Direct cost impact: SMM estimates that the proportion of sulfur in MHP costs reached 41% in January 2026. If sulfur prices continue to rise due to supply disruptions, the sulfur cost in MHP will also increase, squeezing project profit margins.
Surge in sourcing costs: Indonesian buyers will be forced to compete with global buyers for limited non-Middle Eastern supplies. At the same time, rising insurance premiums and increased shipping costs from detours will further drive up the landed cost.
III. Expanded price impact: Accelerated depletion of China's sulfur inventory will further push up prices
As the world's largest sulfur importer, China has a structural dependence on Middle Eastern supplies. This disruption will directly impact domestic sulfur supply and downstream phosphate fertilizer production, further driving up sulfur prices.
1. Extremely high import dependency
China's external dependence on sulfur has long remained at 50%-53%. Customs data shows that in 2025, the Middle East accounted for 56.2% of China's sulfur imports, meaning over half of the imported sulfur logistics will be disrupted.
2. Rigid demand for spring farming preparation
Currently, it is a critical period for spring farming preparation, where there is a rigid demand for sulfur in phosphate fertilizer production. The operating rates of downstream diammonium phosphate enterprises remain high, with restocking demands being released collectively. Bidding generally concludes at a premium, and traders are strongly inclined to hold prices firm.
3. Faster inventory depletion, limited alternative replenishment
According to Tonghuashun Finance, as of February 28, China's total port sulfur inventory was 1.7398 million mt. Based on an average monthly consumption of 1.4-1.5 million mt during the spring farming period, the current inventory can only support 1.2-1.5 months. Considering factory inventories and goods in transit, the support period extends to 1.5-2 months. If the strait blockade continues, the inventory will be rapidly depleted during the peak spring farming period in March-April. Although alternative sources can be sought from North America, the Black Sea, and Central Asia, the extended transportation distance, increased freight costs, and contractual constraints will limit the speed of replenishment.
IV. Downstream Risk Warnings
1. NEV Battery Materials: As a core raw material for ternary cathode precursors, an increase in MHP costs will be passed along the industry chain to cathode materials, battery cells, ultimately affecting the manufacturing cost of NEVs.
2. Phosphate Fertiliser: 56% of China's sulfur imports face a supply disruption risk, with domestic port inventories expected to deplete rapidly during the peak spring farming preparation period. Sulfur prices are likely to break previous highs, impacting downstream phosphate fertiliser prices, and ultimately driving up agricultural production costs.
3. Duration is the Core Variable:
If the shutdown is short-term (1-2 months): The impact will mainly be on price fluctuations, which enterprises can manage through inventory adjustments and raw material substitution.
If the shutdown is long-term (over 3 months): It will lead to a continuous expansion of the supply gap. Some enterprises relying on long-term agreements with the Middle East may experience raw material shortages, reduced facility loads, or even shutdowns. The global sulfur and downstream industry chains will undergo a profound restructuring.
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