* More than half the world's seaborne sulphur came from

the Gulf

* China sulphur prices up by 33% since Iran war started

* Sinopec sees biggest jump in margins in four years

* Refiners still face serious challenges including

refined product export ban

By Sam Li and Lewis Jackson

BEIJING, March 27 (Reuters) - A surge in sulphur prices

turbocharged by the Iran war has turned a marginal byproduct

into an earnings booster even as shortages and price controls

triggered by the war in Iran heap more pressure on China's

struggling refineries.

Separated from oil during refining, sulphur is used in

fertilisers and industry and more than half the world's seaborne

trade in the byproduct once flowed from the Middle East.

The market was already tight and at near-record prices because

of shortages and demand from new industries such as battery

making. Since the war, prices have risen by a third in China,

which imports roughly half its sulphur.

Two-thirds of domestic production comes from China's oil

refiners, which are benefiting from rising prices.

State-owned Sinopec, the world's largest refiner and China's

biggest sulphur producer, reported this week its largest jump in

margins in four years, up about 9% thanks to a boost from

byproducts including sulphur, although profits fell 30% due to

declining fuel sales.

The benefit is likely to be most meaningful for China's

private refiners because of their preference for sulphur-heavy

crude oils from Iran and Canada and, in the case of small

so-called "teapots," their already razor-thin margins.

Major private refiner Hengli Petrochemical said in November

it produced about 600,000 tons of sulphur annually and higher

sulphur prices would support earnings.

The firm did not put a figure on the gain, but the rise in

prices in 2025 would translate to an extra 700 million yuan, or

about 10% of net profit in 2024, according to Reuters

calculations based on consultancy SCI estimates of the refiner's

likely sulphur sales price.

Consultancy JLC reported that margins for Shandong's private

refiners, known as teapots, to process imported crude were 244

yuan per tonne in 2025, up 191 yuan per tonne on-year.

Refiners are not the only businesses benefiting from byproducts.

Copper smelters, which produce a related byproduct, sulphuric

acid, netted a roughly $1.5 billion windfall last year thanks to

a similar rally.

TOUGH OUTLOOK

Surging sulphur prices will not, however, fully offset the

serious issues facing China's refiners: the rising cost of

importing crude oil, a refined fuel export ban that bars

refiners from benefiting from the surge in international prices

and a domestic fuel price cap that forces refiners to absorb

higher costs.

There is also the risk that domestic price caps could be

extended to sulphur because of its importance to fertiliser

making and the government's desire to insulate the agriculture

sector, according to analysts at Citi.

($1 = 6.8681 Chinese yuan renminbi)