Material Insights · Understanding the Material World

Natural gas and Sulfur

Most of the world's sulphur is not mined but removed from sour natural gas and crude oil, so its supply is set by gas processing and refining, not by sulphur prices. Gulf sour gas makes the Middle East a leading exporter, with nearly half of seaborne sulphur trade passing through the Strait of Hormuz, which ties sulphur, and the phosphate fertiliser and nickel leaching that use it, to Gulf gas output and shipping.

Natural gas (energy) and Sulfur (commodity): 5 relationships.

How they are linked

1. By-product of sour gas

Joint production · Strong · Gas processing yields sulphur

Sour gas contains hydrogen sulphide, which must be removed before the gas is sold; the Claus process turns it into elemental sulphur, so sulphur output rises with sour gas production whatever the sulphur price.

  • 84 Mt world sulphur production in all forms, 2025 estimate
  • 7.2, 6.3 and 3.1 Mt Saudi Arabia, UAE and Qatar output, 2025
  • 5.0 and 4.8 Mt Canada and Kazakhstan output, 2025

Because supply follows gas and oil processing, sulphur prices can swing widely with little supply response: the Tampa contract price rose from USD 116 a long ton at the start of 2025 to 310 in early October, the highest since 2022. Canada and Kazakhstan, also large sour gas and oil sands producers, are the other main sources outside the Gulf.

Sources: USGS

2. Gulf supply and Hormuz

Shared risk · Strong · Gulf gas output and shipping set world sulphur supply

The Gulf states are among the largest sulphur producers and their cargoes pass through the Strait of Hormuz, so disruption there removes a large share of traded sulphur at once.

  • nearly half share of seaborne sulphur trade passing through Hormuz
  • about 8 Mt seaborne supply expected to be lost in 2026 (S&P Global, May 2026)
  • 5 to 6 Mt sulphur expected to be stranded in the Middle East by the Hormuz blockade, 2026

The 2026 blockade of the Strait turned this risk into a real shortage, with inventories elsewhere drawn down. Phosphate fertiliser producers and Indonesia's nickel leach plants, whose demand CRU described as unabated in early 2025, compete for the remaining cargoes.

Sources: S&P Global Commodity Insights; CRU, Sulphur magazine (BCInsight)

3. Price link: by-product source

Cost and price · Strong · Both ways

Gas prices do not set sulphur costs, since sulphur is a by-product, but both respond to the same energy shocks, so the yearly link is strong while the monthly link is weak.

  • 0.06 monthly change correlation, European gas and sulphuric acid proxy
  • 0.78 12-month change correlation
  • about USD 170 to 520/t Middle East sulphur FOB price, start of 2025 to early 2026 (SMM)

The yearly correlation comes largely from the 2022 energy shock. The 2025 price surge, by contrast, came from demand for nickel leaching in Indonesia and LFP in China, not from gas, which shows the two prices can move apart. A reader should treat sulphur as a gas-linked supply with its own demand cycle.

Sources: Shanghai Metals Market (SMM); Material Insights (World Bank, FRED, IMF data)

4. Both feed phosphate fertiliser

Shared risk · Medium · Sulphur and gas-based ammonia meet in DAP

Sulphur is burned to sulphuric acid, which digests phosphate rock, and the resulting acid is combined with gas-based ammonia to make DAP, so fertiliser makers buy both.

  • about 90% share of US sulphur consumption used to make sulphuric acid, 2025
  • over 5 Mt sulphur demand tied to MHP nickel in Indonesia, 2025
  • over 3 Mt sulphur demand tied to LFP in China, 2025

A gas shock that raises ammonia costs and a sulphur shock from Gulf supply both lift DAP costs, so phosphate fertiliser producers are exposed to two gas-linked inputs. New energy demand from nickel and LFP now competes with fertiliser for sulphur, adding a third source of pressure.

Sources: USGS; Shanghai Metals Market (SMM)

5. Supply falls with fossil fuel use

Transition · Rising · Less gas and oil processing means less sulphur

Sulphur supply is a side effect of processing oil and gas, so a fall in fossil fuel use would cut sulphur supply while demand for fertiliser and battery metals keeps growing.

  • up to 60% possible fall in sulphur supply by 2050 in an ambitious net zero pathway (S&P Global)

Other sources would be needed: in an S&P Global scenario where half of the sulphur in phosphogypsum is recovered, demand for newly produced sulphur falls from about 92 to 70 Mt. This makes sulphur one of the less obvious materials put at risk by decarbonisation.

Sources: S&P Global Commodity Insights

For investors

Key learnings

  1. Sulphur supply follows sour gas and refinery output, not sulphur prices, so shortages are resolved by demand cuts and price spikes.
  2. The Gulf and the Strait of Hormuz concentrate traded sulphur, which makes phosphate and nickel producers that import it exposed to Gulf disruption.
  3. Sulphur prices roughly tripled between early 2025 and early 2026 on demand from nickel leaching and LFP, showing the gas link explains supply but not every price move.

What to track

  • Middle East sulphur FOB price: Rising prices signal tight trade and higher costs for DAP and nickel producers (Weekly · Argus, CRU)
  • Sour gas project start-ups in the Gulf and Central Asia: New projects add by-product sulphur supply (As announced · ADNOC, Saudi Aramco, QatarEnergy)
  • Shipping through the Strait of Hormuz: Disruption strands Gulf sulphur and lifts prices elsewhere (Daily · shipping trackers)

For policymakers

Key learnings

  1. Phosphate fertiliser makers need both sulphur and gas-based ammonia, so a Gulf gas or shipping disruption can hit several of their inputs at once.
  2. Strategic stocks or long-term supply contracts for sulphur could reduce exposure to Gulf shipping risk.
  3. Decarbonisation could shrink by-product sulphur supply, so long-term fertiliser and battery plans should consider other sulphur sources.

What to track

  • Sulphur and sulphuric acid import volumes and prices: Rising costs feed into DAP subsidy needs (Monthly · trade data; Department of Fertilizers)
  • World sulphur production and inventories: Falling inventories signal shortage risk (Annual · USGS; quarterly · industry outlooks)

India

India produced about 3.7 Mt of sulphur in 2025, and its phosphate fertiliser plants need sulphuric acid, so Gulf supply and shipping risks reach its fertiliser costs.

Sources

  1. Mineral Commodity Summaries 2026: Sulfur, USGS (2026)
  2. Sulfur long-term outlook (sample), S&P Global Commodity Insights (2026)
  3. Sulfur special series: 2025 review and 2026 outlook, Shanghai Metals Market (SMM) (2026)
  4. Sulphur prices soaring, CRU, Sulphur magazine (BCInsight) (2025)
  5. Price correlation, Material Insights, Material Insights (World Bank, FRED, IMF data) (2026)