The closure of the Strait of Hormuz is no longer only an oil and LNG story. A less visible but strategically important commodity has become a new pressure point for global supply chains: sulfur.
Before the Iran conflict, around half of global seaborne sulfur trade moved through the Strait of Hormuz, largely from the Middle East to Asian buyers. According to Reuters, citing Kpler data, sulfur flows through the Strait fell to only 30,000 metric tonnes in April 2026, compared with an average of 1.27 million tonnes per month in the three months before the conflict.
This collapse matters because sulfur is the feedstock for sulfuric acid, one of the most important industrial chemicals in the world. For the electric vehicle sector, the key exposure is not that sulfur is directly used inside most lithium-ion batteries. The risk is upstream: sulfuric acid is required in several battery-metal supply chains, including nickel, lithium and copper.
Before the Iran conflict, around half of global seaborne sulfur trade moved through the Strait of Hormuz, largely from the Middle East to Asian buyers. According to Reuters, citing Kpler data, sulfur flows through the Strait fell to only 30,000 metric tonnes in April 2026, compared with an average of 1.27 million tonnes per month in the three months before the conflict.
This collapse matters because sulfur is the feedstock for sulfuric acid, one of the most important industrial chemicals in the world. For the electric vehicle sector, the key exposure is not that sulfur is directly used inside most lithium-ion batteries. The risk is upstream: sulfuric acid is required in several battery-metal supply chains, including nickel, lithium and copper.
The sulfur price shock is already visible
The loss of Middle East cargoes has pushed delivered sulfur prices in Asia as high as $880 per tonne, up about 50% since the start of the war, according to Reuters. Argus data points in the same direction: ADNOC’s May 2026 sulfur price implies a delivered price of $855-859/t CFR India, before the full impact of additional insurance and bunker-related costs.
This is not only a price story. The more important issue is physical availability. If sulfur and sulfuric acid supply becomes rationed, mining and processing companies will not simply face higher costs. Some may be forced to reduce operating rates if they cannot secure enough chemical input.
This is not only a price story. The more important issue is physical availability. If sulfur and sulfuric acid supply becomes rationed, mining and processing companies will not simply face higher costs. Some may be forced to reduce operating rates if they cannot secure enough chemical input.
Why China’s EV industry is exposed
China is the world’s most important EV market and one of the largest EV exporters. IEA data show that electric cars captured more than half of China’s annual car sales for the first time in 2025. In April 2026, Reuters reported that China’s EV and plug-in hybrid exports rose 111.8% year on year, even as domestic vehicle demand weakened.
This creates a paradox. Higher fuel prices and energy-security concerns can increase demand for EVs, but the same geopolitical shock can disrupt the materials needed to produce EV batteries.
The most direct channel is nickel. Indonesia is the world’s largest nickel producer and a key supplier of battery-grade nickel intermediates. High-pressure acid leaching, or HPAL, uses sulfuric acid to extract nickel and cobalt from laterite ores. Reuters reported that Indonesia imports around 75% of its sulfur requirements from the Middle East, and that HPAL production requires large volumes of acid for every tonne of mixed hydroxide precipitate, or MHP.
Lithium is another exposure. Reuters notes that sulfuric acid is used in extracting lithium from hard rocks in Australia, the world’s largest lithium producer. Copper is also exposed, especially through solvent extraction and electrowinning, where sulfuric acid is used as a leaching reagent.
This creates a paradox. Higher fuel prices and energy-security concerns can increase demand for EVs, but the same geopolitical shock can disrupt the materials needed to produce EV batteries.
The most direct channel is nickel. Indonesia is the world’s largest nickel producer and a key supplier of battery-grade nickel intermediates. High-pressure acid leaching, or HPAL, uses sulfuric acid to extract nickel and cobalt from laterite ores. Reuters reported that Indonesia imports around 75% of its sulfur requirements from the Middle East, and that HPAL production requires large volumes of acid for every tonne of mixed hydroxide precipitate, or MHP.
Lithium is another exposure. Reuters notes that sulfuric acid is used in extracting lithium from hard rocks in Australia, the world’s largest lithium producer. Copper is also exposed, especially through solvent extraction and electrowinning, where sulfuric acid is used as a leaching reagent.
China’s export restrictions tighten the second valve
The supply problem is compounded by policy. S&P Global reported that Chinese authorities imposed restrictions on sulfuric acid exports effective 1 May 2026, with an exception for electronic-grade material. China was the world’s largest sulfuric acid exporter in 2025, shipping about 4.6 million metric tonnes, according to S&P Global Market Intelligence’s Global Trade Atlas.
This matters because China has historically acted as a flexible supplier of sulfuric acid to international buyers. If China redirects acid toward domestic fertilizer and industrial needs, import-dependent mining systems in Chile, Indonesia and other regions lose an important balancing source.
This matters because China has historically acted as a flexible supplier of sulfuric acid to international buyers. If China redirects acid toward domestic fertilizer and industrial needs, import-dependent mining systems in Chile, Indonesia and other regions lose an important balancing source.
Market impact: from cost inflation to production risk
The first-order effect is cost inflation. Reuters reported that Macquarie estimates the rise in sulfur prices has added around $4,000 per tonne to Indonesian HPAL nickel production costs, lifting the cost curve to $14,500-18,000 per tonne.
The second-order effect is operational risk. If sulfuric acid supply is insufficient, producers may have to cut consumption, delay shipments, reduce run rates or prioritize higher-margin output. Reuters has already reported that some Indonesian producers have started reducing run rates as stocks remain low.
The third-order effect is battery supply-chain risk. China’s EV makers may not feel the shock immediately at the assembly line, but the pressure can move through precursor producers, cathode makers and battery-cell manufacturers if nickel, lithium or copper availability tightens.
The second-order effect is operational risk. If sulfuric acid supply is insufficient, producers may have to cut consumption, delay shipments, reduce run rates or prioritize higher-margin output. Reuters has already reported that some Indonesian producers have started reducing run rates as stocks remain low.
The third-order effect is battery supply-chain risk. China’s EV makers may not feel the shock immediately at the assembly line, but the pressure can move through precursor producers, cathode makers and battery-cell manufacturers if nickel, lithium or copper availability tightens.
The market should track these five indicators:
- Monthly sulfur flows through the Strait of Hormuz, especially cargoes from the UAE, Saudi Arabia and Qatar to Asia.
- CFR Asia and CFR India sulfur prices, with particular attention to freight, insurance and safe-passage premiums.
- Chinese sulfuric acid export policy after May 2026.
- Indonesian HPAL run rates and MHP output.
- Battery-grade nickel, lithium chemicals and copper SX-EW production indicators.
Al Banyan Tree view
The sulfur shock is a classic example of a hidden supply-chain constraint. Oil prices are the visible market signal, but sulfuric acid availability may become the more important bottleneck for selected battery-metal producers.
The risk to China’s EV sector should not be overstated as an immediate production shutdown. A prolonged Hormuz disruption raises the probability of higher battery-metal costs and selective upstream production curtailments, especially in nickel HPAL and acid-dependent copper and lithium processing.
For EV manufacturers, the key question is no longer only whether battery materials are available in geological terms. It is whether the chemical supply chain required to process those materials remains open, priced and physically reliable.
The risk to China’s EV sector should not be overstated as an immediate production shutdown. A prolonged Hormuz disruption raises the probability of higher battery-metal costs and selective upstream production curtailments, especially in nickel HPAL and acid-dependent copper and lithium processing.
For EV manufacturers, the key question is no longer only whether battery materials are available in geological terms. It is whether the chemical supply chain required to process those materials remains open, priced and physically reliable.