Singapore: The primary Yellow Phosphorus producing region, Yunnan, has observed a worsening hydropower shortage situation amidst the region's prolonged drought. The Yellow Phosphorus market is already facing a severe impact of government policies regarding power consumption as it considerably impacted the availability of the material in the region. Although, the supply-demand outlook has sustained a balance for the long term amidst the COVID-related shutdowns in the region. However, the dynamics shifted after the Chinese authorities eased the restrictions, followed by improved commercial and economic activities in the market. As per the ChemAnalyst Pricing Intelligence, the Yellow Phosphorus market in China has likely to observe a sudden surge in the offers quoted for Yellow Phosphorus in the domestic market

The Yellow Phosphorus market in China has observed a tremendous rebound in the monthly average offers since the last month of the fourth quarter of 2022. Lower operating rates predominantly support this development amidst the manufacturing facilities coupled with the tightened availability of the material in the domestic market. Even though operations in the domestic market have improved after the Chinese authorities eased the COVID restrictions, the arbitrage for Yellow Phosphorus has improved exponentially as the restoking practices for Yellow Phosphorus have soared in the domestic market to counter the hindrances in the value chain after the Lunar New Year holidays end.

As per the market experts, the drought conditions in Yunnan province are anticipated to worsen in the upcoming weeks. In response, it levies a direct impact on the manufacturing capabilities in the domestic market as the province and nearby provinces like Guangdong and Guangxi will observe an energy crunch. As per the Analyst, the reliance on power generation will now be more focused on alternative fuels like Coal, Oil, and LNG. The energy crunch in two major manufacturing regions will likely hinder the rebound in the projected domestic PMI of the manufacturing sector. At the same time, a possible outcome of change in the policies for power rationing will further hamper the manufacturing capabilities for Yellow Phosphorus in the region. In response, the offers for Yellow Phosphorus will remain on an upward trajectory.