From Fertilizers to Chemicals – A "Super Sulfur Shock" Triggered by the Iran War

As the market focuses on crude oil and natural gas, a more "covert" bottleneck—sulfur—is redefining the pricing of fertilizers and parts of the metal supply chain. HSBC pointed out in its commodity economic review released on March 16 that the conflict in the Middle East is triggering a "super squeeze" on sulfur. The report shows that sulfur had already risen significantly due to limited supply and strong demand before the Middle East conflict; the direct supply disruptions caused by the conflict, combined with shipping risks in the Strait of Hormuz, have pushed sulfur prices to "new record highs." Sulfur, often regarded as a "secondary commodity," is largely produced as a byproduct rather than being directly mined and processed like many industrial raw materials. However, this "minor commodity" is actually a key input for many industrial processes. The United States Geological Survey (USGS) states that "sulfur, through its main derivative sulfuric acid, is one of the most important elements used as an industrial raw material." Sulfuric acid is even referred to as the "king of chemicals" and is the "most widely used industrial chemical globally." Middle East: The "Heartland" of Global Sulfur About 90% of the world's sulfur supply is a byproduct of fossil fuel processing, known as "recovered sulfur." This makes the Middle East, with its vast hydrocarbon industry, the absolute core of global sulfur trade. Data shows that by 2025, the Middle East (Saudi Arabia, UAE, Qatar, Kuwait, and Iran) will account for about 25% of global sulfur production and nearly 50% of global maritime sulfur trade. "Global supply chain shocks often reveal how economies are interconnected and dependent on each other," noted the bank's chief economist Paul Bloxham. Just as last year's trade tensions exposed the world's reliance on rare earths like gallium and yttrium, the destruction caused by the Middle East conflict reveals another bottleneck—sulfur supply. "Super Squeeze": Prices Hit Historic Highs The report indicates that sulfur prices were already high before the Middle East conflict and are expected to "significantly rise" in 2025, reaching "the highest level since the peak in 2022." Behind this is supply being compressed by multiple factors: due to refinery shutdowns, power outages, declining low-sulfur crude oil production, and drone attacks on Russian refineries along with export bans, sulfur supply remains constrained. At the same time, demand has not cooled simultaneously: strong seasonal fertilizer demand and Indonesia's growing nickel high-pressure acid leaching (HPAL) business provide structural demand support for sulfur. Against this backdrop of a "tight supply base," the Middle East conflict has become the last straw that broke the camel's back. The report refers to it as a "super-squeeze." The risk of closure in the Strait of Hormuz and direct supply disruptions (such as the Bahrain Bapco refinery and the UAE Ruwais refinery facing force majeure or shutdowns due to attacks) have directly pushed sulfur prices to new historical highs. Transmission Chain: Fertilizers Feel It First, Metals and Semiconductors Follow Suit The report breaks down the uses of sulfur very clearly: On the fertilizer side, sulfur is mainly used in the production of phosphate fertilizers, such as MAP (Monoammonium Phosphate) and DAP (Diammonium Phosphate), which are crucial for global agricultural supply; On the industrial side, sulfuric acid is used in copper smelting, electroplating, metal processing, artificial silk, and film production; in the semiconductor sector, sulfuric acid is also used for cleaning silicon wafers. Therefore, when sulfur prices are elevated, the first to be "named" is fertilizer. The report suggests that the Middle East conflict and higher sulfur prices "may drive DAP prices further up." The report further warns: aside from sulfur-related fertilizers, nitrogen fertilizers also face risks—Iran is the world's third-largest urea exporter, accounting for about 11% of global urea trade; the Strait of Hormuz carries about one-third of global trade volume. "In the context of supply tightening, rising fertilizer prices may lead farmers to reduce their fertilizer usage," the report warns. This usually means a decline in crop yields. For many agricultural producers, this is undoubtedly adding insult to injury—they are facing the dual blow of low agricultural prices and high input costs. Long-term supply disruptions could profoundly impact the supply chain and pricing across the entire region. Who is most vulnerable: Asia and Africa This "super squeeze" puts Asian and African countries, which heavily rely on imports, at the forefront. For example, Indonesia relies on the Middle East for about 75% of its sulfur imports. As the world's largest nickel producer (supplying over 50%), sulfur accounts for about 50% of its HPAL plant operating costs, and inventories are usually low. The sulfur shortage directly threatens its critical battery metal supply chain. In Africa, 90% of sulfur imports in the Copperbelt region come from the Middle East, and cobalt production in the Democratic Republic of the Congo, which accounts for 70% of global supply, also requires sulfur as a raw material.