04/03/26
Sulphur chokepoint threatens battery metals
Sulphur chokepoint threatens battery metals
London, 4 March (Argus) — The widening conflict in the Middle East threatens to
squeeze the supply of sulphur through the strait of Hormuz, with potential
long-lasting second-order effects on key battery metals production. The most
immediate industrial vulnerability lies in sulphur produced in Mideast Gulf
countries — and by extension sulphuric acid — a critical input for copper and
cobalt leaching in the central African copperbelt, nickel leaching in Indonesia
and lithium extraction and refining globally. Roughly half of global seaborne
sulphur trade transits the strait of Hormuz. With Middle Eastern refinery
operations disrupted and shipping largely halted, global sulphur availability
has tightened sharply. Africa is particularly exposed. Nearly all sulphur
imported by southern African buyers last year originated in the Middle East.
Argus assessed spot sulphur prices at the key hub of Dar es Salaam, Tanzania, at
$615-630/t fca on 3 March, an increase of just $20/t since 27 February, as
stocks in the port are ample. But the structural vulnerability is clear.
Delivered trucking costs from Dar es Salaam to Kolwezi in the Democratic
Republic of Congo (DRC) are about $280/t. That implies delivered sulphur prices
approaching $900/t dap Kolwezi this week. At typical 3:1 conversion ratios, that
suggests sulphuric acid costs nearing $300/t, much higher than other regional
benchmarks. Sulphur fob Middle East prices were assessed at $494-496/t. Both
prices had experienced a slight dip ahead of the conflict but have jumped in the
initial days of the war. Copperbelt heavily impacted The central African
copperbelt imports roughly 2mn t/yr of sulphur, producing around 6mn t/yr of
sulphuric acid for oxide copper leaching. An additional 2.5mn t/yr of acid is
generated by regional copper smelters processing concentrates. Higher acid
prices directly raise copper production costs in one of the world's
fastest-growing supply regions. The same belt is also the centre of global
cobalt production. The DRC accounts for roughly 70pc of global mined cobalt
supply. Major producers include Glencore, whose Mutanda and Kamoto operations
produced around 40,000t of cobalt in 2024, and China Molybdenum (CMOC), whose
Tenke Fungurume and Kisanfu mines together produced more than 55,000t of cobalt
last year. But the DRC has room to manoeuvre in the cobalt markets, as it has
imposed an export quota on producers since late last year. There is probably a
significant production overhang in the country itself, so a loosening of the
policy could be used to shore up market supply in the event of a tight squeeze.
The mechanism that shuts down global trade is not necessarily naval blockades
but the withdrawal of war risk insurance, Robert Friedland, the founder of
Ivanhoe Mines, noted this week. Seven of the 12 members of the International
Group of P&I Clubs have issued cancellation notices for war risk coverage in the
Mideast Gulf, extending beyond the strait of Hormuz itself to Iranian waters and
the Gulf of Oman. Nickel mines and lithium refineries exposed Sulphuric acid
also plays a critical role in the wider battery metals supply chain. It is a key
reagent in pressure acid leach (HPAL) operations used to produce nickel from
laterite ores in Indonesia, now the world's dominant source of battery-grade
nickel, producing more than 50pc of global supply. Several large Indonesian HPAL
projects consume millions of tonnes of sulphur annually to generate acid for
leaching operations. Indonesian nickel mixed hydroxide precipitate (MHP)
producers have ceased offering long-term contractual material to assess the
potential impact of sulphur supply disruptions. Fuel impacts in Indonesia could
also be acute. Indonesia's crude supply from the Middle East passes through
Hormuz and makes up around a fifth of national demand, energy minister Bahlil
Lahadalia said on 3 March. Sulphuric acid is also widely used in lithium
extraction and processing. Hard-rock spodumene concentrate is typically
converted into lithium chemicals using sulphuric acid roasting, while several
emerging direct lithium extraction and brine conversion routes also depend on
large volumes of sulphuric acid. A sustained rise in sulphur prices therefore
risks feeding directly into global battery metal production costs. Again, Africa
is most exposed, but a recent lithium concentrate export ban in Zimbabwe may
actually relieve the pressure on other mines in the region. Australia, the
world's largest lithium spodumene producer, receives most of its sulphur from
Canada, so should remain far more insulated. That said, the second-largest
supplier is Qatar, albeit by some distance. General inflationary pressures
brought on by an extended crisis can and will affect the Chinese refining
industry, which was already struggling with margin pressure from growing
spodumene prices and could emerge as the weak link in the lithium supply chain.
Lithium refining is an energy and reagent-intensive process. Elevated LNG and
power costs in Asia, combined with rising sulphur and sulphuric acid prices used
in the conversion of spodumene into lithium chemicals, could significantly
increase operating costs for converters. At the same time, demand uncertainty or
weaker downstream battery markets could limit refiners' ability to pass those
costs on. China accounts for roughly 80pc of global lithium chemical refining
capacity, meaning that any sustained pressure on Chinese converters would have
disproportionate consequences for global lithium supply. By Thomas Kavanagh &
Fenella Rhodes Send comments and request more information at
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