Recovery of Sulfuric Acid Supply versus Weak Demand: A Bottoming and Rebound in August?

Lead: In July 2026, the domestic sulfuric acid market experienced a turning point from high-level stalemate to downward pressure. The previously supportive "supply bullish" factors gradually faded, with weak demand becoming the main contradiction in the market. The Chempricehub price index for 98% sulfuric acid fell from 1,800 RMB/ton at the beginning of the month to 1,650 RMB/ton at the end, with a monthly average of 1,862.3 RMB/ton, a decrease of 35.3 RMB/ton from the previous month, or a decline of 1.94%.

I. Supply Side: Centralized Return of Maintenance Capacity, Significantly Increased Supply Pressure

Table 1 Monthly Sulfuric Acid Supply-Demand Balance (Unit: 10,000 tons, RMB/ton)

Source: Chempricehub Information. Note: ① Total Supply = Production + Imports; Total Demand = Downstream Consumption (actual consumption in downstream markets) + Exports; Supply-Demand Gap = Total Supply - Total Demand.

In July, the domestic sulfuric acid supply side showed a moderate recovery trend. According to Chempricehub data, national sulfuric acid production in July is expected to reach 8.47 million tons, a significant increase of 547,000 tons from June's 7.923 million tons, up 6.90% month-on-month. Capacity utilization recovered to 62.54%, up 1.29 percentage points from the previous period. The core driver of this supply rebound was the centralized restart of previously maintained units. A total of 24 sulfuric acid units were under maintenance in July, with the monthly loss reduced to 698,200 tons, a decrease of 385,300 tons from the previous month, down 35.56% month-on-month. Multiple units in Shandong resumed production in early to mid-July, and capacity in Anhui and other regions also resumed operations by mid-month. In August, as previously maintained smelter acid units in Shandong, Hubei, Hunan, Anhui and other regions resume production, market spot circulation is expected to increase. By acid production process, the restart of smelter acid is the main contributor to supply growth. Although sulfur-burning acid plants maintain low operating rates due to raw material cost inversions, their market space has been compressed by by-product acid, limiting their impact on the overall situation. Sulfur prices have decoupled from sulfuric acid prices and failed to drive sulfuric acid costs. From a regional price performance perspective, the impact of supply recovery has been fully reflected in market prices. Jiangsu sulfur-burning acid fell 12.50%-12.00% month-on-month, Hunan smelter acid fell 8.33%-6.49% month-on-month, and Hubei smelter acid delivered prices fell 7.89%-7.50% month-on-month.

II. Demand Side: Traditional Off-Season Coupled with Deepening Losses, Downstream Procurement Remains Weak

In stark contrast to the rapid supply recovery, demand performance remained sluggish. Phosphate fertilizer industry: In July, monoammonium phosphate (MAP) capacity utilization was 56.57%, up 7.59 percentage points month-on-month but still down 10.95 percentage points year-on-year. Diammonium phosphate (DAP) capacity utilization was 39.96%, up only 3.08% month-on-month and down 23.21% year-on-year. Phosphate fertilizers are in a transition period from the traditional off-season to autumn fertilizer preparation, with operating rates still relatively low, resulting in mainly small-lot, immediate-need procurement of sulfuric acid.

Titanium dioxide industry: Capacity utilization was 72.29%, down 1.77 percentage points month-on-month. Titanium dioxide companies also faced operating constraints due to their own cost pressures, with low willingness to replenish raw material inventories. Caprolactam: Capacity utilization was 68.15%, down 0.85 percentage points month-on-month. In July, the iron phosphate and lithium iron phosphate markets continued to see strong supply and demand, with iron phosphate profits improving more significantly due to declining raw material costs, while lithium iron phosphate profits slightly decreased due to lithium carbonate price movements. Meanwhile, end-user demand remained strong, with steady increases in just-in-time procurement for iron phosphate and lithium iron phosphate, pushing capacity utilization up by 1.88% and 0.6%, respectively.

In terms of apparent consumption, the July forecast is 8.471 million tons, up 6.69% month-on-month, roughly in line with production growth. However, this increase reflects more of a recovery release of previously sluggish demand rather than strong pull from new demand. More critically, the July production forecast of 8.47 million tons is highly consistent with the apparent consumption forecast of 8.471 million tons, with the supply-demand gap nearly zero. On the surface, this appears to be a "tight balance," but in reality, it represents a barely matching of supply and demand at low levels, rather than demand actively absorbing incremental supply.

Downstream users generally hold a "buy on rising, not on falling" mentality, further extending the procurement wait-and-see cycle. High raw material costs have left phosphate fertilizers, titanium dioxide, and other downstream sectors deeply loss-making, making significant operating rate recovery unlikely in the short term.

III. Costs and Profits: Divergent Profitability Among Three Acid Production Routes, Sulfur-Burning Acid in Deep Losses

In July, profitability trends for the three domestic sulfuric acid production routes diverged: Sulfur-burning acid: Profit was -478.20 RMB/ton, down 18.42% month-on-month and down 1003.86% year-on-year. Although sulfur prices fell slightly, they remained at historically high levels. Today's spot price for Yangtze River granular sulfur is 9,170 RMB/ton. Cost pressure continues to suppress operating rates at sulfur-burning acid plants. Smelter acid: Profit was 1,578 RMB/ton, up 1.81% month-on-month and up 255.41% year-on-year. The cost advantage of by-product acid allows it to maintain considerable profitability in the current market environment. Ore-based acid: Profit was 39 RMB/ton, down 58.51% month-on-month. Overall, although the average price of sulfur-burning acid increased by 72.5 RMB/ton in July, the average cost increased by 159.56 RMB/ton, further worsening profitability. Smelter acid maintains profitability due to its cost advantage, but the decline in sulfuric acid prices is eroding its profit margins.

IV. Market Outlook: Downward Pressure in August, Focus on Autumn Fertilizer Start-up Pace

August Forecast: The Chinese sulfuric acid market in August is expected to show a weakened trend with downward pressure and a lower center of gravity. Fundamentals suggest that price weakness is mainly due to the dual suppression of supply recovery and demand weakness. On the supply side, previously maintained smelter acid units in Shandong, Hubei, and other regions have resumed production, significantly increasing spot market circulation. Although sulfur-burning acid plants maintain low operating rates due to cost inversions, they cannot reverse the overall supply increase trend. On the demand side, phosphate fertilizers are in a transition period from the traditional off-season to autumn fertilizer preparation. MAP and DAP operating rates remain relatively low, with sulfuric acid procurement mainly small-lot and immediate-need. Chemical sectors such as titanium dioxide and fluorochemicals also face operating constraints due to their own cost pressures, with low willingness to replenish raw materials. Furthermore, the continued decline in sulfuric acid prices in July has significantly suppressed market sentiment. Downstream users generally hold a "buy on rising, not on falling" mentality, further extending the procurement wait-and-see period. However, upstream sulfur prices remain in a historically high range, keeping sulfur-burning acid production costs elevated. This provides a solid cost floor for sulfuric acid prices, limiting the downside to a large extent. Entering mid-to-late August, as acid prices gradually fall, downstream companies' raw material inventories will be depleted, and just-in-time replenishment demand is expected to be released. At the same time, some smelter acid plants may moderately adjust output due to narrowing profits, potentially marginally improving the supply-demand contradiction. Market transaction atmosphere is expected to warm up in late August, with prices possibly stabilizing or even rebounding slightly. However, constrained by limited overall demand volume, the rebound is expected to be moderate, and the full-month price decline may narrow.

Three-Month Outlook (Sep-Oct): Looking ahead to September-October, domestic sulfuric acid prices are expected to show a "first weak then strong" pattern. In September, as the phosphate fertilizer industry gradually exits its traditional off-season, autumn fertilizer preparation demand will start to pick up moderately, potentially improving downstream procurement activity. However, on the supply side, previously maintained smelter acid units have largely resumed production, making market supply relatively ample and capping upward price potential. Additionally, the approaching National Day holiday will lead to transportation restrictions, prompting acid plants to conduct routine inventory reduction operations in advance to ease inventory pressure, further weakening price upward momentum. Therefore, sulfuric acid prices in September are expected to consolidate weakly near August levels. Entering October, the autumn phosphate fertilizer peak application season will officially begin, fertilizer companies' operating rates are expected to rise periodically, significantly increasing just-in-time sulfuric acid procurement. Meanwhile, some major acid plants in Guangxi, Jiangxi, and Anhui have planned maintenance for some units. On the supply side, the raw material cost inversion issue for sulfur-burning acid plants has not been fundamentally resolved, making a large overall supply surplus across the industry unlikely. Supported by marginal demand improvement, sulfuric acid prices may experience a modest rebound, but constrained by the overall supply-demand pattern and downstream limited tolerance for high prices, the rebound amplitude is expected to be relatively moderate.