Sulfur prices have plummeted, yet sulfuric acid prices are rising instead of falling—why?

Since mid-June, domestic sulfur prices have retreated sharply from their historical highs for the year, dropping by more than 20% on a weekly basis. As of June 24, the mainstream transaction price for sulfur at ports stood at around 9,200 yuan—a decline of over 20% since mid-June—while quotes from inland enterprises had even fallen below 9,000 yuan. Conversely, the price of domestic industrial sulfuric acid (primarily the 98% concentration grade) has risen rather than fallen, remaining firm above the 2,000-yuan mark with a weekly increase of 1.96%. This marks the first time this year that the market trends for sulfur and sulfuric acid have diverged sharply.

"The traditional linkage logic—whereby sulfuric acid price movements were directly driven by sulfur price fluctuations—has temporarily broken down. This is the inevitable result of a confluence of factors, including the differentiation of diverse supply structures, the upgrading of downstream demand patterns, and the restructuring of market pricing logic. Analytical methods that rely solely on sulfur price fluctuations to predict sulfuric acid market trends are no longer fully applicable," analyzed an official from the Henan Petrochemical Industry Association.

Differentiation of Diverse Supply Structures
An executive at a sulfuric acid production plant in Henan stated that this year's surge in sulfur prices triggered fundamental changes in the domestic sulfuric acid supply structure, leading to a divergence in supply sources—specifically between smelter-produced acid and ore-based acid. Currently, acid produced as a smelting byproduct accounts for approximately 60% of the total domestic sulfuric acid supply. Its pricing logic is completely decoupled from sulfur market trends; it has become a key pillar supporting firm acid prices and is the most critical factor behind this price divergence. A market landscape in which smelter-produced acid is priced independently has now taken shape.

An executive at a smelting enterprise in Inner Mongolia noted that with copper concentrate processing fees remaining persistently low—resulting in meager profits or even losses for core smelting operations—byproduct sulfuric acid has become a primary source of profit for smelters, significantly boosting their pricing power. Regardless of fluctuations in upstream sulfur prices, smelting enterprises prioritize sulfuric acid revenue and do not lower their quotes in tandem with sulfur price drops. "Production cuts in sulfur-based acid due to losses, combined with reduced output from smelter-grade acid plants undergoing maintenance, have tightened the overall supply of sulfuric acid. This 'dual supply contraction' has offset the bearish pressure caused by falling sulfur prices and is a primary reason why sulfuric acid prices have risen rather than fallen," the executive explained.

**Upgrading of Downstream Demand Structure**
Meng Jianwei, an executive at Henan Ruiyuan New Energy Chemical, noted that the upgrading of the sulfuric acid downstream demand structure—specifically the resilience of new essential demand—has offset the negative impact of the traditional off-season. This is another factor contributing to the price increase.

The second quarter is traditionally an off-season for the phosphate fertilizer industry, a period when sulfuric acid prices typically face downward pressure. However, this year, new demand from the new energy sector has filled the gap left by the agricultural off-season. Overall demand resilience has far exceeded that of previous years, providing sustained support for high-priced acid. For instance, lithium iron phosphate (LFP) production and wet-process nickel smelting have become core drivers of increased sulfuric acid consumption. With stable operating rates in the power battery industry and the continued commissioning of overseas wet-process nickel projects, the consumption of industrial-grade sulfuric acid has steadily risen. Procurement in this sector relies primarily on long-term contracts driven by essential needs; buyers are less price-sensitive and do not halt purchasing on a large scale due to raw material price fluctuations. This continuous consumption of available market supply bolsters the confidence of acid producers in maintaining higher prices.

Market insiders also report that, although phosphate and compound fertilizer enterprises have entered their traditional off-season, there remains persistent, essential demand for agricultural fertilizer stockpiling. Downstream plants are maintaining normalized production at low operating rates, with on-demand inventory replenishment continuing uninterrupted. Meanwhile, expectations of price increases for the autumn fertilizer season have prompted mid- and downstream players to stock up early, thereby reducing market supply and alleviating downward price pressure. Concurrently, essential demand from traditional sectors like chemicals and metallurgy remains stable. While industries such as titanium dioxide, chemical fibers, and metal pickling face cost pressures, their production schedules remain rigid. Market transactions are dominated by small orders and long-term contracts, with no instances of panic selling or aggressive price-suppressing procurement; the stable trading atmosphere provides further support for the high-priced acid market. Restructuring of Market Pricing Logic
Shao Huiwen, a veteran market commentator, noted that in previous years, sulfuric acid prices moved in close lockstep with sulfur prices; this was primarily because the market relied heavily on sulfur-based acid production, meaning pricing tracked raw material fluctuations directly. However, the industry's supply-demand landscape has undergone a fundamental shift, leading to a restructuring of pricing logic—moving from a model "anchored solely to sulfur" to one "driven by supply and demand with a cost-based floor." When overall market supply is tight and corporate inventories are low, minor fluctuations in raw material costs merely influence market sentiment rather than altering supply-demand fundamentals. Currently, finished product inventories at acid plants across the country remain low—typically covering just 3 to 7 days of sales. With no incentive to cut prices to clear stock, companies are maintaining stable quotes, with some localized, modest upward adjustments in line with market trends.

Traders also report that despite a pullback from peak sulfur prices, the composite cost of raw materials remains historically high, raising the break-even point for sulfuric acid producers. A consensus has emerged across the industry to withhold shipments at low prices; the scope for significant price concessions has vanished, creating a solid price floor. Meanwhile, high prices in certain regions are keeping the national average price elevated.

An executive at a Shandong-based fertilizer company stated that although sulfur prices have dropped sharply, the fundamental balance of tight supply and demand remains unchanged; cost support for the sulfuric acid industry stays strong, and the supply-demand gap persists.

Data from Longzhong Information shows that national sulfur production in the third week of June totaled only 184,400 tonnes, while consumption reached 328,200 tonnes—a month-on-month increase of 7.71%. Imports were severely insufficient; as of June 18, recorded arrivals of liquid sulfur totaled only 12,600 tonnes, a sharp month-on-month drop of 43.75%, with no scheduled arrivals of solid sulfur at Yangtze River ports. Consequently, some sulfur-based acid plants have been forced to reduce operating rates or halt production due to raw material shortages. Beyond sulfur-based production, pyrite-based acid serves as a crucial supplement; however, rising mining and transportation costs for pyrite have driven up production costs for pyrite-based acid. As a result, low-priced pyrite-based acid cannot be used to temper the market average, effectively raising the cost floor across all categories of sulfuric acid. Consequently, the decline in sulfuric acid supply and high production costs remain the primary factors underpinning high price levels.

Industry insiders note that, in the short term, a drop in sulfur prices is unlikely to trigger a significant decline in sulfuric acid prices; the market is expected to continue fluctuating within a narrow range at high levels. This divergence between sulfur and sulfuric acid prices is not merely a short-term market anomaly but the inevitable result of a confluence of structural factors. The traditional analytical approach—relying solely on sulfur price fluctuations to predict sulfuric acid market trends—is no longer fully applicable. Moving forward, market analysis should incorporate a multidimensional data set—including raw material costs, diverse supply sources (such as sulfur-based, smelter-grade, and ore-based acid), and evolving downstream demand—to effectively mitigate risks and seize opportunities.

A representative from the Henan Petrochemical Industry Association cautioned that this marked divergence—characterized by falling upstream sulfur prices alongside firm, rising midstream sulfuric acid prices—introduces significant uncertainty regarding future market trends. Coupled with recent volatility in the Middle East, industry players should clarify their strategic outlook and remain vigilant against the risks associated with high-level market fluctuations.