China uses strategic sulphur reserves as a tactical buffer amid fertilizer supply risks

The Chinese government is responding to disruptions in sulphur supply caused by the Middle East conflict that began in late February and led to the closure of the Strait of Hormuz. This situation has sharply increased shipping costs and sulphur prices, creating serious risks for phosphate fertilizer production, which is essential for China’s spring planting season. About 47% of China’s sulphur is imported, mostly from Persian Gulf countries, making domestic fertilizer production highly vulnerable to any disruption in shipping routes.

To mitigate the impact, the National Development and Reform Commission (NDRC) has prioritized supplying domestic fertilizer producers with sulphur from strategic reserves. This move aims to maintain production stability and control prices amid geopolitical uncertainty. The strategic release of sulphur stocks is a tactical measure designed to ensure continuous fertilizer production and stabilize the market in the short term.

The issue is particularly critical given China’s ambitious agricultural targets for 2026, which aim to increase grain production by 50 million tonnes. Achieving this goal requires robust fertilizer use, but rising costs and limited sulphur availability create a direct conflict between economic realities and policy objectives. The drawdown of strategic sulphur reserves addresses this tension in the short term, helping to keep production flowing.

China’s long-term strategy focuses on raising crop yields and increasing total grain output to 725 million tonnes by 2030, but this approach creates structural dependence on imported raw materials. Reliance on Persian Gulf supplies and limited domestic sulphur production make the system vulnerable to geopolitical shocks. While the current drawdown eases immediate pressure, it does not resolve the underlying supply risk.

The effectiveness of China’s tactical buffer depends on the duration of the Middle East conflict and the reopening of the Strait of Hormuz. Fertilizer market dynamics, price adjustments, and demand trends will serve as key indicators of stability. In the long term, China will need to either expand domestic sulphur production or diversify import sources to ensure resilience and safeguard its food security objectives.

Tags: fertilizers