Supply shortages lead to higher sulfur prices; focus on the petrochemical ETF Huaxia (159731) for low-cost entry opportunities.

As of 2:00 PM on April 3, Sinopec ETF Huaxia (159731) fell 0.9%, while holdings including Shengquan Group, Haohua Technology, Hengyi Petrochemical, Tongcheng New Materials, and Hangyang Shares rose the most.

Since the middle of 2023, sulfur prices in China have continued to rise. According to Baichuan Yingfu, on March 27, the domestic sulfur quotation was 5,415 yuan/ton, which had increased by 681% from the low point in July 2023. Industry insiders analyze that, unlike in 2007 and 2021, this round of sulfur price hikes is caused by supply shortages, with downstream production links passively accepting the situation. By-products from crude oil refining and natural gas processing are the main sources of global sulfur supply.

Huatai Securities believes that the main reason for the supply decline in this round of sulfur is that after the explosion of the “Nord Stream” pipeline, Russia’s western region reduced production of acidic natural gas, together with a decline in processing volumes of Russian crude oil due to sanctions—while North American shale oil and shale gas have lower sulfur content. After the outbreak of the U.S.-Israel-Iran conflict, the global sulfur supply shortfall was further exacerbated.

Sinopec ETF Huaxia (159731) and its linked funds (017855/017856) closely track the CSI Petrochemical Industry Index. Driven by both basic chemicals and oil & petrochemicals, they also cover high-dividend and high-growth assets. The constituent stocks include Wanhua Chemical (a global MDI leader), China National Petroleum Corporation (a leading domestic oil and gas company), China Petroleum & Chemical Corporation (a leading domestic refining and chemicals company), Salt Lake Shares (a leading domestic potash fertilizer company), and others.

Daily Economic News