Yellow phosphorus: Supply anchors price floor, Demand determines price ceiling
Due to the high energy consumption and high pollution characteristics of yellow phosphorus production, China strictly controls new production capacity, maintaining a stable industry scale and number of enterprises with a high production concentration. Quotations and bidding prices of the manufacturers from major production areas strongly guide the market overall, enabling producers to dominate price stabilization and profit maintenance. In Yun’nan, the industry has remained profitable so far in 2026. Surging sulfur prices in H1 activated substitution and price linkage effect between wet-process and hot-process phosphoric acid, driving up P4 price and pushing the peak industry profit margin to about 35%. After mid-June, sulfur prices declined and dragged yellow phosphorus prices down, yet the industry stayed above the cost line and stabilized with a 12% profit margin before a mild rebound.
Weak demand restricts the upward room of P4 price. Although yellow phosphorus price retreated moderately in June, it remained at a relatively high stage. Rising price of purified wet-process phosphoric acid provided cost support for hot-process P.A., but downstream phosphate industries remained slow operation rate with insufficient demand, P4 purchases were slow. The periodic rebound of yellow phosphorus price from July to August drove a slight follow-up increase in hot-process P.A. price. But the lack of solid demand support made the price increase unsustainable.
The price trend of phosphorus trichloride is highly consistent with yellow phosphorus, while also affected by liquid chlorine pricing. The market entered a traditional off-season from July to August. To avoid risks in sales, inventory and profits, most manufacturers cut production or suspended operation, leading to a sluggish production and sales. Downstream purchasers adopted a wait-and-see attitude, reducing procurement volumes and pressing prices to bottom, with low acceptance of high prices in slack season.
Overall, yellow phosphorus price was mainly driven by rising sulfur price in H1, 2026. Sulfur’s impact weakened after June, P4’s own fundamental supply and demand became the core factor dominating market trend. Currently, the supply side can effectively support price and guarantee profit, but the persistent weak demand for phosphorus trichloride and hot-process phosphoric acid severely limits price increase, keeping the market in a volatile state. In conclusion, the supply side firmly underpins P4 bottom price, while the price ceiling is entirely determined by the recovery of terminal demand and the activity of actual market transactions.
