Market and product

Compiled by Bao Hien

The global yellow phosphorus market in 2026 is facing a paradox. China, which accounts for around 85% of global production, is at risk of oversupply as new capacity comes online, while prices in many other markets remain under upward pressure from rising energy costs and geopolitical disruptions.

Against this backdrop, Vietnam continues to hold a prominent position in the international market, ranking as the world’s second-largest yellow phosphorus exporter.

China: Prices Rise Early in the Year, Oversupply Looms

China’s yellow phosphorus market began 2026 on an upward trajectory. According to ChemAnalyst, prices rose 3.8% in January as producers in Yunnan, Sichuan and Guizhou cut operating rates ahead of the Lunar New Year holiday.

At the same time, stockpiling demand from the agricultural chemicals sector, particularly glyphosate and thermal phosphoric acid producers, reduced domestic inventories. Higher winter electricity costs and lower hydropower generation also contributed to the price increase.

In April, a production incident in Guizhou further disrupted supply. Yellow phosphorus prices in the province were reported at RMB 32,500-32,800 per tonne.

However, this upward trend is unlikely to continue in the medium term. Mysteel estimates that China could face a net oversupply of around 45,500 tonnes in 2026. New capacity is expected to add approximately 105,000 tonnes per year, while demand from downstream industries such as phosphorus trichloride and glyphosate is projected to grow by only about 59,500 tonnes.

A key issue is the mismatch between the timing of new capacity and demand recovery. Most of the new capacity is expected to come online in the first half of the year, while demand is forecast to recover more strongly in the second half. This gap could lead to inventory accumulation and put downward pressure on prices.

China’s yellow phosphorus production capacity is currently concentrated mainly in Yunnan, Sichuan, Guizhou and Hubei, with total installed capacity of around 1.58 million tonnes. However, the actual operating rate was only about 63% in 2025, indicating substantial potential for additional supply.

From Yellow Phosphorus to Higher-Value Chemicals

Oversupply in the conventional yellow phosphorus segment is encouraging China to pursue a new strategy: reducing reliance on basic products and shifting toward higher-value-added phosphorus chemicals.

Yunnan is promoting the development of a greener phosphorus chemicals industry focused on high-value applications. A number of projects in Yunnan, Sichuan and Anhui are being developed to upgrade production technologies and diversify product portfolios.

These include a 20,000-tonne-per-year phosphorus sludge recycling project in Xuanwei, Yunnan. In Anhui, a project producing advanced phosphorus-based flame retardants such as TCPP and BDP has total investment of approximately US$31.84 million and is expected to generate more than US$143 million in annual revenue once completed.

The trend suggests that China’s strategy is not simply to increase yellow phosphorus output, but to raise the value generated across the entire phosphorus chemicals chain.

Vietnam: A Major Supply Hub Outside China

While China accounts for the overwhelming majority of global yellow phosphorus production, supply from other countries remains relatively limited because of the specific requirements for raw materials, technology and energy.

Among producers outside China, Vietnam has emerged as a major player. According to HDIN Research, Vietnam has become the world’s second-largest yellow phosphorus exporter, accounting for nearly one-third of global exports. Duc Giang Chemicals is among the Vietnamese companies with a significant position in the sector.

Some sources estimate Vietnam’s annual yellow phosphorus production at around 180,900 tonnes.

However, this export strength comes with a major challenge: energy costs.

Producing yellow phosphorus through electric arc furnaces is one of the most electricity-intensive industrial processes. Each tonne of finished product requires approximately 12,000-14,000 kWh of electricity. Electricity prices therefore have a direct impact on production costs and profit margins.

This makes Vietnamese producers particularly sensitive to fluctuations in global energy markets.

Middle East Conflict Raises Cost Risks

Geopolitical instability in the Middle East in 2026 is adding another layer of risk to the yellow phosphorus market and related products.

The Strait of Hormuz is one of the world’s most important energy transportation routes, carrying around 30% of globally traded fertilizers and 27% of globally traded oil. Any disruption along the route can quickly affect oil and gas prices, freight rates and chemical production costs.

Yellow phosphorus is not produced directly from crude oil or natural gas in the same way as many petrochemical products, but it shares one important characteristic: extremely high electricity consumption. As energy costs rise, the production cost of yellow phosphorus also comes under pressure.

In March 2026, as regional tensions escalated, analysts warned that prices of some phosphate-related products could rise by around 50%. Fertilizer prices were also reported to have increased by as much as 40% within less than a month after the conflict began.

Higher transportation costs and the need to reroute shipments to avoid geopolitical hotspots have added further pressure to raw material supply chains.

Prices Continue to Rise Despite Oversupply Risks

Price developments in the first half of 2026 show that the yellow phosphorus market cannot be explained by conventional supply-and-demand dynamics alone.

In China, spot prices rose from around RMB 23.26/kg in January to RMB 26.28/kg in March, an increase of more than 14%.

In India, prices increased from around US$4,300 per tonne in April to nearly US$5,000 per tonne in June, representing an increase of approximately 16%.

Meanwhile, China continued to impose restrictions on exports of certain phosphate fertilizer products to safeguard domestic supply. These measures have helped reduce the availability of products on international markets and supported prices.

The market is therefore being influenced by two opposing forces: rapidly expanding production capacity, particularly in China, and rising energy, logistics and geopolitical costs.

Opportunities and Challenges for Vietnam

The yellow phosphorus market in 2026 presents a notable paradox. China could face oversupply even as prices continue to rise in the short term, while other exporting countries have an opportunity to benefit from disruptions to global supply.

For Vietnam, its position as the world’s second-largest exporter provides a significant advantage as demand for phosphorus chemicals continues to grow. However, this position does not necessarily mean that producers can easily expand their market share.

The sector’s extremely high electricity consumption means that competitiveness depends heavily on electricity prices and operational efficiency. When energy and logistics costs fluctuate, the cost advantage between producers can change rapidly.

In the longer term, the key challenge for Vietnam’s phosphorus industry may not simply be to increase yellow phosphorus production, but to move further into higher-value phosphorus chemicals.

As China shifts from competing primarily on production volumes toward competing on value, Vietnamese producers face a similar strategic choice: maintain their position as major yellow phosphorus exporters or move further up the value chain to capture a larger share of the higher-value phosphorus chemicals market.

Sources: ChemAnalyst; SunSirs; Mysteel; CCM/Cnchemicals; HDIN Research; Expert Market Research; Procurement Resource.