The global sulfur crisis is fundamentally altering the production landscapes for copper, nickel, and lithium. The disruption has shifted short-term pricing dynamics from supply-demand fundamentals to cost-driven pressures.
For copper, risk premiums have increased for hydrometallurgical operations in the Democratic Republic of Congo. In the nickel sector, valuations for High-Pressure Acid Leach (HPAL) projects in Indonesia are shifting from growth assets to problematic assets. In the lithium carbonate market, sulfuric acid-based production capacity reliant on externally sourced mineral concentrates is transitioning from mainstream supply to marginal, swing capacity, facing persistent pressure to be phased out.
In the long term, a strategic evolution in processing routes is anticipated. For copper and nickel, the vulnerability of hydrometallurgical routes to sulfuric acid supply has become apparent, significantly enhancing the relative value of pyrometallurgical processes. For lithium carbonate, the strategic importance of lithium extraction from salt lakes and lithium mica is accelerating, as these methods are less dependent on sulfuric acid.
Since the outbreak of Middle East conflicts, the Strait of Hormuz, a critical channel for Middle Eastern sulfur exports, has faced ongoing shipping disruptions. The impact of these supply-side constraints on industrial chains is becoming increasingly pronounced. The transmission chain—from sulfur to sulfuric acid, to hydrometallurgical smelting, and finally to product supply—is significantly impacting copper, nickel, and lithium carbonate. In contrast, aluminum and zinc are minimally affected by the sulfur shortage. The severity of the impact is primarily determined by each commodity's reliance on sulfuric acid for production and its self-sufficiency capabilities.
Medium-term perspectives suggest the sulfur supply-demand imbalance may be difficult to reverse, potentially leading to a profound restructuring of cost curves in related industries. It is important to note that the primary impact on aluminum stems from direct production cuts or shutdowns of electrolytic aluminum capacity due to the Middle East situation, which is unrelated to sulfur.
**I. Core Transmission Mechanism**
**1. Sulfur Supply Directly "Blocked"**
* **Global Supply Structure:** Approximately 60% of global sulfuric acid is produced from sulfur, 30% is a by-product of metal smelting, and 10% comes from pyrite. Sulfur is primarily a by-product of oil refining and natural gas processing desulfurization, tying its supply closely to oil and gas production. * **Maritime Artery Crisis:** According to Kpler data, nearly half of global sulfur exports in 2025 transited the Strait of Hormuz. Following the geopolitical conflict that hindered navigation through the strait, sulfur loadings from the Middle East have dropped significantly year-on-year, causing global sulfur trade volumes to shrink. In China, sulfur prices have surged 54%, rising from about 4,000 yuan per ton in early 2026 to 6,150 yuan per ton. The price of 98% sulfuric acid has increased 77%, climbing from approximately 1,056 yuan per ton to 1,870 yuan per ton. * **Limited Supplementary Supply:** Constraints on crude oil supply are expected to lead to reduced operational rates at refineries in East Asia, further diminishing by-product sulfur output. Increased production from North American shale oil and gas, which has low sulfur content, is insufficient to effectively compensate for the Middle Eastern sulfur shortfall, highlighting a global supply gap. * **Inelastic Supply Characteristic:** Sulfur output is entirely dependent on the production schedule of its primary products (oil, gas, smelting). It cannot be independently expanded in the short term, resulting in very low supply elasticity.
**2. Dual Squeeze: Sulfuric Acid Cost and Supply**
* **Rigid Demand Structure:** S&P Global data indicates that about 50%-55% of global sulfuric acid is used in fertilizer manufacturing, a key raw material for phosphate fertilizers (e.g., monoammonium phosphate, diammonium phosphate, triple superphosphate). The metal smelting and mining sector accounts for approximately 18%-22%; sulfuric acid is used in hydrometallurgy for leaching and purifying non-ferrous metals like copper, nickel, cobalt, and zinc. The SX-EW process for copper ore consumes 3-4 tons of sulfuric acid per ton of cathode copper produced, while nickel ore HPAL processes require substantial acid volumes. Chemical raw material production uses about 10%-12%, for products like titanium dioxide, caprolactam, hydrofluoric acid, and ferric phosphate. The remaining 11%-22% is used in water treatment, dyes, pharmaceuticals, and other fields. * **Core Cost Transmission:** Sulfur cost constitutes over 70% of sulfuric acid production costs. The sharp rise in sulfur prices directly pushes up sulfuric acid prices. * **Intense Demand Competition:** Against the backdrop of supply shortages, food security takes higher priority. The fertilizer sector, with its massive and rigid demand, is poised to preferentially secure sulfuric acid resources. Metal smelters and lithium processing plants face the dilemma of being squeezed out due to "no acid available" or having to "compete for acid at high prices." * **Price Amplification Effect:** Under extreme supply-demand imbalances, sulfuric acid price increases often far exceed the cost pass-through from sulfur, resulting in unexpected cost shocks for downstream users.
**3. Differential Impact Logic**
In an environment of scarce and expensive sulfur-sulfuric acid, the intensity of sulfuric acid consumption and self-sufficiency capabilities determine the severity of the impact. Copper and nickel, with their dense hydrometallurgical production lines, and lithium carbonate produced via the sulfuric acid roasting method are the most vulnerable.
**II. Deep Analysis of Impact on Various Non-Ferrous Metals and Lithium Carbonate**
The analysis focuses on the specific vulnerabilities of each metal based on acid dependency and self-supply capability.
**III. Hedging Strategies and Investment Implications**
**1. Short Term** Hydrometallurgical projects for copper and nickel, along with lithium processing plants, will experience a reshaping of their cost curves. High-cost capacity, such as nickel projects without captive acid supply and lithium carbonate plants using the sulfuric acid method with purchased concentrates, will be the first to be phased out. This will drive the marginal cost and price floor higher for copper, nickel, and lithium carbonate.
**2. Long Term** Investment risk premiums will rise for projects in regions heavily reliant on sulfur, including hydrometallurgical copper in the DRC, HPAL nickel in Indonesia, and sulfuric acid-based lithium carbonate production in China. The industry will accelerate process migration and substitution: the copper and nickel industries may see a strategic return from hydrometallurgy to pyrometallurgy (e.g., flash smelting, RKEF). The lithium industry will hasten the adoption of less sulfuric acid-dependent pathways, such as lithium extraction from salt lakes and lithium mica.
**3. Key Influencing Factors** The ultimate magnitude of the impact depends on three dynamic factors:
* **Strait Navigation Pace:** The duration of the geopolitical conflict will determine whether this is a short-term shock or a long-term structural crisis. The medium-term supply-demand imbalance is difficult to resolve; even with short-term easing, price benchmarks may be elevated over the medium to long term. * **Acid Allocation Policies:** If governments mandate priority allocation of sulfuric acid to fertilizer production, it would further reduce the acid share available to the metals and lithium sectors, amplifying the supply gap. * **China's Export Policy:** As the world's largest sulfuric acid producer, if China tightens sulfuric acid exports, it would directly exacerbate the "acid famine" overseas, magnifying the impact on foreign hydrometallurgical copper, nickel, and lithium carbonate operations.
From an investment perspective, risk pricing should revolve around two dimensions: exposure to hydrometallurgical processes and sulfuric acid self-sufficiency capability. Opportunities to capture a rebound in high-cost capacity may arise if the geopolitical situation shows substantive easing.
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