Benchmark Mineral Intelligence has quantified that over half of global lithium, cobalt, rare earth, and purified phosphoric acid production is exposed to disruptions in sulphur and sulphuric acid markets, with Middle East conflict and China's export ban simultaneously tightening supply of these critical processing inputs. Sulphur prices have climbed more than 50% since the start of the Iran conflict, while acid prices have more than doubled in some regions, cascading into cost bases across the battery supply chain. The shock compounds existing 2026 fragility: DRC cobalt quotas, Indonesia's RKAB constraints, and the Jianxiawo restart all leave battery metals with multiple simultaneous upstream stress points.
Introduction
A geopolitical shock originating in the Strait of Hormuz is transmitting through an overlooked vector into the heart of the global battery supply chain. Benchmark Mineral Intelligence has determined that sulphuric acid now accounts for 59% of purified phosphoric acid production costs at current prices, while sulphur's share of high-pressure acid leaching nickel costs has risen to 42% from a prior 26%. More broadly, Benchmark's analysis finds that over half of global lithium, cobalt, rare earth, and purified phosphoric acid output in 2026 is exposed to disruptions in sulphur and sulphuric acid markets. For high-purity manganese sulphate monohydrate, the input used in manganese-containing battery chemistries, that exposure figure reaches 100%.
The triggering event is the effective closure of the Strait of Hormuz to commercial dry bulk traffic on February 28, 2026, following the US-Israel conflict with Iran. The Strait handles roughly half of global seaborne sulphur trade, and the disruption was measurable almost immediately: Gulf sulphur loadings fell to approximately 400,000 tonnes in March alone, a 74.5% year-on-year decline. By the first supply peak in April, more than 600,000 tonnes of sulphur sat stranded across fertiliser-laden vessels in the Gulf.
A compounding shock arrived on April 10, when China announced a full export ban on sulphuric acid through August 2026, replacing an existing 700,000-tonne annual quota with a complete cessation. China is the world's largest acid exporter, with Chile, Indonesia, and Saudi Arabia as its primary markets. Goldman Sachs estimated the ban would remove approximately 1.5 million tonnes of acid from the seaborne market through December, roughly a tenth of total trade volumes. As Syed Salman Shaffi of the Gold Miners Club observed, the Iran conflict created a shortage of raw materials while China's export halt triggered what amounts to a commercial drought: two independent shocks striking the same critical input simultaneously.
The result, as Will Talbot, Benchmark's research manager for raw materials, stated directly: "Not only do high acid prices increase the cost base of lithium, nickel, copper, manganese, phosphoric acid and rare earth refiners, a lack of physical sulphur availability has already led some of these metal and chemical refiners to cut production."
The Sulphur Price Shock: Magnitude and Mechanism
Sulphur is not a commodity that responds to price signals on the supply side. Its production is determined by how much oil and gas the world processes, not by sulphur's own price or market demand. That structural ceiling means the energy transition's surging acid requirements cannot be met by simply incentivising more sulphur output. The Atlantic Council, writing in April 2026, framed the underlying architecture clearly: the transition created surging demand for sulphuric acid to manufacture its hardware while simultaneously reducing the fossil fuel throughput that produces sulphur as a refinery byproduct, with demand projected to rise from 246 to 400 million metric tonnes by 2040 even as supply peaks and declines.
The price data reflects that structural bind interacting with an acute geopolitical disruption. Local sulphur prices have surged to approximately $1,200 per tonne, roughly double the pre-Iran war level, according to Argus. The Abu Dhabi National Oil Company set its April official selling price at $600 per metric tonne, up $70 from March. For context, the sulphur price to Indonesia had already risen from $101 per metric tonne in July 2024 to $554 per metric tonne by January 2026, a 440% increase driven by HPAL sector expansion, before the Iran conflict added further upward pressure.
Spot acid prices have surged to $1,000 to $1,400 per tonne in some regions, according to Wood Mackenzie, eroding inventories and hitting smaller, import-dependent operators hardest. Benchmark data shows spot acid prices in Indonesia and Chile have climbed above $380 and $440 per tonne respectively as converters compete for alternative supplies. Unlike oil, sulphur cannot be moved through a pipeline and must be shipped as dry bulk freight, making rerouting around the Hormuz disruption both logistically complex and cost-prohibitive for smaller operators.
The UAE has emerged as the only Middle Eastern Gulf country still able to move sulphur via the Strait, with Kpler confirming just three UAE-sourced transits in May 2026. Major shipping lines including Maersk and Hapag-Lloyd have suspended Persian Gulf operations entirely. As Talbot noted, even if the Strait reopens, damage to Middle Eastern oil refinery infrastructure means disruption to sulphur supply could persist well beyond any ceasefire or diplomatic resolution.
Cost Cascades Across Battery Metals Processing
The most immediate and precisely quantifiable impact falls on lithium chemical conversion. China's lithium converters transform imported spodumene concentrate, primarily from Australia and Zimbabwe, into battery-grade lithium hydroxide and lithium carbonate through roasting with sulphuric acid. Benchmark data shows that sulphuric acid previously represented approximately 3% of the cost of producing lithium chemicals from hard rock sources. That share has now risen to 11%, overtaking energy as the largest individual C1 cost component. Simultaneously, converters face increased LNG costs, since the energy-intensive roasting kilns that transform spodumene into battery-grade compounds are fuelled by LNG, meaning two critical inputs have repriced upward in tandem.
Battery-grade lithium carbonate prices in China have risen approximately 65% in US dollar terms since the start of 2026, a rally that reflects supply restraint and input cost pressure rather than demand-side strength. As covered in this publication's July analysis of the Jianxiawo restart, the lithium market entered the second half of 2026 with a complex balance: CITIC Futures projects worldwide supply climbing 23% to 2.106 million tonnes LCE while demand rises 30% to 2.099 million tonnes, implying a surplus of just 7,000 tonnes under a base case that now must be stress-tested against acid supply assumptions that have materially deteriorated.
For HPAL nickel in Indonesia, the exposure is severe and structurally embedded. Indonesia imports approximately 75% of its sulphur requirements from the Middle East, and some HPAL plants carry only one to two months of sulphur inventory. Sulphur's contribution to HPAL production costs has risen to 42%, up from 26% before the conflict. Nickel processing requires two to three tonnes of sulphuric acid per tonne of refined nickel, and Indonesian ore grades falling below 1.5% increase acid consumption per unit of nickel recovered due to the fixed chemical relationship in the HPAL process, a compounding factor that operational efficiency alone cannot resolve. Indonesian MHP producers have already halted long-term contract offers while they assess supply risk.
In the Democratic Republic of Congo, the sulphur exposure compounds what is already a structurally stressed supply picture. Africa's copper belt imports approximately two million tonnes of sulphur per year, with approximately 90% originating from the Middle East for oxide copper leaching. Copper and cobalt leaching operations in the DRC are 50 to 60% reliant on imported sulphuric acid. The DRC's key vulnerability is that the Gulf accounts for over 90% of Copperbelt acid supply, and securing new sulphur supply can take almost two months while some facility inventories cover only a single month of operations. Some smaller cobalt and copper operators have already slowed output. Jubilee Metals Group finance director Jonathan Morley-Kirk confirmed the company has explored pooling purchases with other operators in response to disrupted acid supply from local smelters and the Middle East.
Compounding Stress: DRC Quotas, Indonesia RKAB, and the Jianxiawo Restart
The sulphuric acid shock does not arrive into a battery supply chain that was otherwise stable. It compounds three pre-existing upstream stress points that have been building independently since late 2025, each of which reduces the market's capacity to absorb additional disruption.
The DRC cobalt quota system, administered through the regulatory authority ARECOMS, has been producing a structural market deficit since its October 2025 establishment. The 2026 quota stands at 96,600 tonnes against 2024 production of approximately 230,000 tonnes, meaning over 130,000 tonnes of annual output stockpiles in-country while the ex-DRC market runs short. The execution gap has made the physical shortfall even more acute than the quota headline implies: between December 2025 and February 2026, only 7,800 tonnes received export clearance, roughly 2,600 tonnes per month against a quota implying 8,050 tonnes per month. Less than 50% of Q4 2025 and Q1 2026 allocations actually shipped. Cobalt metal prices have risen from approximately $21,000 per tonne in early 2025 to over $56,000 per tonne by mid-2026, an appreciation of approximately 167% within roughly 12 to 18 months. Fastmarkets projects a structural shortfall of approximately 10,700 metric tonnes against demand of approximately 292,300 metric tonnes. As Fastmarkets analyst Oliver Masson has stated, the pipeline is growing drier every week under current quota levels.
Indonesia presents a parallel constraint through a different mechanism. The 2026 RKAB nickel ore quota allocation of 270 wet metric tonnes fell short of expected demand of 345 wet metric tonnes and the 2025 allocation of 375 wet metric tonnes, tightening feedstock supply for the HPAL sector precisely as that sector's acid input costs are surging. The irony is structural: Indonesia's cobalt-in-MHP output is forecast to climb 39% to 53,318 tonnes in 2026 as Chinese-backed HPAL plants expand, and Argus forecasts MHP capacity to nearly double to 862,000 tonnes per year in 2026. That expansion is now running directly into sulphur supply constraints and a Chinese acid export ban that eliminates the secondary backstop supply at the exact moment the primary Gulf source is disrupted.
CATL's Jianxiawo mine obtained its safety production permit on June 29, 2026, officially restarting after a 10-month suspension following permit expiry in August 2025. As detailed in this publication's earlier analysis of the Jianxiawo restart and its market impact, the mine accounts for approximately 3% of 2025 global output and holds annual LCE capacity of approximately 100,000 tonnes. Benchmark forecasts up to 50,000 tonnes LCE from Jianxiawo in 2026, now forecasting 62,500 tonnes LCE mined for the full year. The restart arrived ahead of the September timing Benchmark had initially assumed, but offsetting suspensions and deferrals elsewhere in Jiangxi province have left Benchmark's overall supply balance essentially unchanged. Zimbabwe's indefinite suspension of raw mineral and lithium concentrate exports adds a further feedstock risk for converters dependent on Zimbabwean spodumene, particularly given the multi-year timeline required to construct in-country processing capacity.
The cumulative picture, as Ivanhoe Mines founder Robert Friedland put it in April, is of a supply chain that has barely begun to feel the war's full impact. Wood Mackenzie's Global Head of Thermal Coal Markets, Tony Knutson, framed the systemic dimension: what began as an operational disruption in the Middle East is becoming a structural cost and supply chain challenge for global metals and mining markets with primary, secondary, and tertiary impacts.
Structural Asymmetries: Who Absorbs the Shock and Who Does Not
The acid supply shock does not distribute evenly across the battery metals complex. Integrated producers with domestic or captive sulphur and acid production face materially lower exposure than import-dependent operations. Benchmark has stated explicitly that countries with domestic sulphur and acid production capacity, such as the United States, are likely to be more insulated than import-reliant jurisdictions including Australia. Copper smelters represent the clearest structural beneficiary: sulphuric acid is produced as a byproduct of sulphide ore smelting, meaning these operations generate the input that HPAL operators must now source at $1,000 to $1,400 per tonne. Ivanhoe's Kamoa-Kakula complex in the DRC, for example, benefits from captive acid production through copper smelting that insulates it from import dependency.
The most exposed operations share a common profile: they are import-dependent for sulphur or acid, located in jurisdictions with limited domestic production, and operating with thin inventory buffers. Indonesia's HPAL sector exemplifies all three characteristics. Freeport, operating the Grasberg copper mine in Indonesia, has already lifted its 2026 cost estimates in part because prices for diesel and sulphuric acid have been highly volatile with significant regional dislocation. Smaller cobalt and copper operators in the DRC are slowing output. In Zambia, Jubilee Metals has moved to collaborative purchasing to manage supply risk. The UNCTAD March 2026 brief found the sulphur-driven input cost shock will fall disproportionately on mineral-dependent economies in Sub-Saharan Africa and Southeast Asia, many of which are already under significant financial strain.
The rare earths sector faces a different variant of the same problem. While the Iran conflict has not disrupted rare earth supply chains as directly as sulphur-intensive battery metals, the global shortage of sulphuric acid used to leach and separate rare earth ores is now intensifying pricing pressure across that market as well. The processing dependency runs across virtually every mineral critical to the energy transition, a fact that pre-conflict risk assessments had largely overlooked according to UNCTAD's analysis.
The asymmetric beneficiary argument for copper smelters carries an important caveat. Wood Mackenzie's Charles Cooper has noted that while the direct impact on the global copper market remains limited, risks are likely to build later in 2026 as higher fuel and sulphuric acid costs feed through to SX-EW operations, which account for 17% of copper supply according to Goldman Sachs. Copper futures on the London Metal Exchange are more than 40% higher than a year ago and touched a record above $14,500 per tonne in January, but that price signal reflects broad tightness rather than isolated Hormuz effects.
Policy Implications and the Forward Risk Architecture
The Hormuz sulphur shock has exposed a structural vulnerability that energy transition planning frameworks had not adequately stress-tested. The sulphur supply chain presents a dual problem for policymakers: supply is determined by hydrocarbon processing throughput rather than by price or policy incentives, and roughly half of seaborne trade transits a single maritime chokepoint. The energy transition's own logic, which reduces fossil fuel consumption and therefore sulphur byproduct volumes while simultaneously increasing demand for acid-intensive mineral processing, creates a tightening constraint over any multi-decade decarbonisation timeline.
Benchmark's Talbot has made the forward risk explicit: with the reopening of the Strait of Hormuz still unresolved, and damage to Middle Eastern oil refineries set to extend disruption to sulphur supply even if the Strait reopens, the outstanding risk is that more critical minerals players cut production or even shut down operations entirely. That is not a tail risk framing. It is a direct assessment of inventory trajectories in HPAL operations carrying one to two months of sulphur supply, sourcing from a region where even a normalisation of maritime traffic would leave refinery infrastructure damaged and export capacity below pre-conflict levels for a material period.
For Western battery supply chain strategy, the episode reconfigures the risk calculus in ways that extend beyond the immediate acid cost shock. The sulphur-lithium-cobalt nexus demonstrates, as Observer Research Foundation framed it in June, how China's dominance in critical mineral refining can become a structural liability when upstream inputs are disrupted at a maritime chokepoint. China's lithium converters face simultaneous increases in LNG costs and sulphuric acid costs, yet they retain scale, integration advantages, and policy support that smaller Western-oriented operations lack. China's acid export ban further complicates any Western strategy that had relied on Chinese acid flows as a secondary supply buffer for operations in Chile or Indonesia.
The implications for supply chain resilience investment are significant. Tony Knutson's formulation captures the strategic conclusion: integrated producers with localised or secure input streams will remain resilient, while operations dependent on long-distance, high-exposure maritime feedstocks face persistent supply constraints and volatile margins. Building on the analysis of cobalt network fragility published here in June, the sulphur shock confirms that the most dangerous supply chain vulnerabilities in battery metals are not located at the mining stage but at processing and refining bottlenecks, where input dependencies concentrate and cascade nonlinearly.
Conclusion
Three data points define the current condition of the battery metals supply chain with unusual precision. Sulphur's share of HPAL nickel costs has risen from 26% to 42%. Sulphuric acid's share of purified phosphoric acid production costs stands at 59%. And acid previously representing 3% of hard rock lithium conversion costs now accounts for 11%, overtaking energy as the largest single C1 cost component. These are not projections or estimates subject to revision; they are the current arithmetic of operating an acid-intensive processing industry when Gulf sulphur exports have fallen 74.5% year-on-year and China has simultaneously banned sulphuric acid exports.
The battery supply chain entered 2026 with three pre-existing stress points: a DRC cobalt quota system producing a structural market deficit of approximately 10,700 tonnes against demand near 292,300 tonnes; an Indonesian RKAB nickel quota allocation 75 wet metric tonnes below expected demand that is constraining HPAL feedstock precisely as acid costs surge; and a global lithium market where Jianxiawo's restart adds supply while Zimbabwe's export ban removes feedstock security elsewhere. The sulphur shock does not replace any of these dynamics. It operates on top of them, compressing margins across the entire processing tier simultaneously.
Benchmark Mineral Intelligence's Will Talbot has stated that critical minerals prices have already skyrocketed since the start of the year and that more supply disruptions could push prices up even further. The data supports that framing. What Hormuz has exposed is not a temporary shock that resolves when maritime traffic normalises, but a permanent vulnerability built into the architecture of the energy transition itself: an industrial system that generates its own critical input constraint as it scales, concentrated at a single maritime chokepoint, and not yet reflected in the supply chain resilience strategies of the governments and companies that depend on it most.