The impact of fertilizer policies on sulphur markets

The sulphur and phosphate fertilizer markets are being shaped increasingly by policy decisions rather than by ordinary seasonal fundamentals. That is not to say supply and demand no longer matter: they do. But in 2026, the dominant forces are state actions: export bans, tariffs, sanctions, subsidy systems, and security decisions that affect shipping lanes, gas availability, and plant operations. In that sense, the market is being repriced not just by commodity tightness, but by policy risk.

The clearest example is the Middle East conflict, which has moved from being a geopolitical headline to a direct market event. If one includes the US decision to strike Iran or escalate against Iranian assets, that becomes especially important for fertilizer markets because it affects the Strait of Hormuz, regional gas flows, sulphur exports, and LNG availability. The result is a chain reaction that has tightened sulphur supply, lifted phosphate costs, and pushed both markets into a much more defensive mode.

Sulphur

In sulphur, the current market is best understood as a security-driven supply shock. The conflict in the Middle East has reduced global trade to around 50% of typical monthly volumes. That is an enormous disruption for a market that depends heavily on the region. At the same time, regional production is only down about 30%, which means a large part of the lost flow is actually trapped by policy, shipping risk, and vessel paralysis rather than full destruction of capacity.

Middle East inventory is building at around 40-45,000 tonnes per day while exports are halted or constrained. That means the region is not simply losing output. It is stockpiling a future wave of supply that could flood the market once shipping normalises. But that is only a medium-term possibility. In the short term, policy-driven insecurity is forcing buyers to compete for the limited tonnes that are still moving.

The sulphur shock is not just a regional event, as the Middle East is the key source of sulphur for many importers: in 2025 Indonesia sourced 76% of sulphur imports from the Middle East; India depended on the region for 84% of imports; and southern Africa relied on it for 93%. This means that the market becomes less about price discovery and more about rationing. Buyers cannot simply pay more and solve the problem, because there may not be enough available cargoes.

The price response has been dramatic. CRU expects f.o.b. sulphur prices to peak at around $750–770/t in April 2026, while some delivered prices have already moved above $800/t. These are extreme levels, above the 2022 peak and close to the 2008 record. The market has moved from uncomfortable to exceptional.

Affordability

The policy impact is not limited to supply. It is also damaging affordability and changing buyer behaviour. Sulphur prices now represent around 70–80% of phosphate prices in some markets, the highest share ever recorded. That is effectively a policy-led cost shock to phosphate production. Buyers are beginning to respond by reducing purchases, drawing down inventory, or switching products. China has reduced sulphur import requirements in 2026 Q1; Mosaic has idled SSP production and sulphur purchasing at Fospar and Araxá in Brazil; and some industrial users are also adjusting operating rates because high sulphur costs are no longer commercially manageable. That means the market is already seeing early demand destruction. But because sulphur is a core input into phosphate fertilizers and some metals processes, the effect of policy-driven disruption is still incomplete. Demand cannot adjust fast enough to avoid near-term tightness.

The longer-term sulphur picture also reflects policy decisions. CRU expects Middle East supply growth to resume only gradually from 2027, with key projects such as the Ghasha development in the UAE and other gas-linked expansions eventually adding volume. But these projects are now exposed to delay because of the conflict. That matters because the market had already been relying on project-led supply growth to restore balance. If those projects are delayed, the deficit persists longer, with the sulphur market likely to remain in deficit until around 2028.

Other regions are not in a position to offset this quickly. North America is expected to plateau or decline as refinery throughput changes. Europe faces structural sulphur decline from refinery closures and lower sulphur content in crude. Canada remains dependent on stock drawdown to maintain export levels.

Phosphates

In phosphates, policy impacts are even more visible because the key market driver is Chinese restrictions on DAP, MAP, and NP exports. China has announced that exports would remain restricted until August 2026. These are the tightest restrictions seen so far, and expectations are that only around 4 million tonnes of DAP and MAP will be exported in 2026. China is using export policy as a domestic price-management tool. The international consequence is tighter supply and higher prices elsewhere.

Replacement sources are limited. OCP in Morocco and Ma’aden in Saudi Arabia are both expanding and exporting strongly, but their extra tonnage will not fully offset the loss of Chinese supply. That means the policy decision in China is effectively setting a higher floor for world prices.

Chinese NP, SSP, and TSP exports have been important to Brazil, but those flows are expected to weaken in 2026. That has direct market implications. Brazil may need to move back toward MAP, or it may face higher prices if alternatives are not available.

India

India continues to play a central role in both sulphur and phosphate markets, though for different reasons. In phosphates, India remains a major importer with still-strong demand, but stocks are in a somewhat better position than in 2025. India’s DAP stocks were around 1.7 million tonnes at the end of January 2026, which is a better position than in 2025. That may reduce the urgency in buying somewhat, but India still remains a large importer. The policy structure means buyers can continue importing even when prices are well above normal market economics. The Indian fertilizer system is deeply policy-driven, with domestic prices shaped by subsidies and government support. The current DAP importer breakeven remains above market reality, which means imports continue to depend heavily on policy guarantees.

United States

The United States is another region where policy is influencing trade flow. DAP and MAP were added to tariff exemptions in late 2025, and US import demand should recover in 2026. But domestic phosphate production remains under pressure because of weaker rock quality and overall supply challenges. That means the US is likely to import more, not less, even as the domestic industry struggles. In a globally tight phosphate market, that matters. US demand coming back into the market can compete directly with India and Brazil for available product.

The same is true for sulphur, where US demand is expected to recover while local supply does not expand much. The market is therefore likely to remain structurally import dependent.

Policy as a fundamental

Across both markets, the same pattern appears again and again:

• Middle East conflict removes sulphur supply and disrupts shipping

• Chinese export controls tighten phosphate availability

• Tariff changes redirect trade rather than eliminate it

• High sulphur prices raise phosphate production costs and compress margins

• Inventory drawdown becomes a temporary substitute for real supply

• Product switching emerges when affordability worsens

This is why sulphur and phosphate are both now deeply policy-sensitive markets. In sulphur, the issue is immediate physical availability. In phosphates, the issue is export policy combined with expensive feedstock. But in both cases, the effect is the same: a tighter, more expensive, and more volatile market.

Outlook

The sulphur market is likely to remain tight through 2026, with prices elevated and availability the dominant concern. If Middle East shipping remains impaired for longer than expected, the upside risk is significant. If exports resume quickly, there could be a sharp correction, but not necessarily a return to comfortable supply conditions.

Phosphate markets are set up for a strong 2026 price year, supported by tight Chinese exports, high sulphur costs, and continuing demand from Brazil, India, and the US. Prices may eventually ease in 2027–2028 as supply improves, especially if Ma’aden and OCP continue to expand, but the near-term picture remains firm.

The broader conclusion is that both markets are being pulled by geopolitics and policy rather than just normal fertilizer cycles. Sulphur is reacting to war and shipping disruption. Phosphates are reacting to export controls and input cost inflation. Together, they show how closely linked fertilizer markets have become to the political and logistical risks of the modern commodity system.