Sulphuric Acid Supply Chain: The Reagent Choking the Energy Transition in 2026
The sulphuric acid supply chain is the most important input cost story in critical minerals that the energy transition narrative has not been built around. Conflict in the Middle East and the closure of the Strait of Hormuz drove acid prices more than double in some regions between late February and mid-April 2026, with sulphur prices up more than 50%, according to Benchmark Mineral Intelligence. For hard-rock lithium, sulphuric acid used to account for around 3% of conversion cost. It now represents 11%, overtaking energy as the single largest C1 line item. For HPAL nickel, sulphur now accounts for 42% of production costs. The battery supply chain runs on a by-product of the thing it is meant to replace.
Benchmark analysis published in May 2026 found that more than half of global lithium, cobalt, rare earth, and purified phosphoric acid production expected in 2026 is in the exposed column. High-purity manganese sulphate, used in EV cathodes, is 100% dependent on sulphuric acid. The energy transition story has always been told through geology and demand. The thing most likely to choke it this year is a reagent and a shipping lane.
Where the Sulphuric Acid Supply Chain Begins and Why Acid Cannot Be Produced on Demand
Sulphuric acid is produced almost entirely from sulphur, and most of the world’s sulphur supply is a by-product of oil and gas refining. It is not a commodity that can be produced independently in response to a price signal. Refiners process crude oil and natural gas; sulphur comes out of that process as an unavoidable output. When refining activity is disrupted or when sulphur export routes are physically blocked, production capacity cannot simply be redirected.
At least half of global seaborne sulphur trade passes through the Strait of Hormuz. Gulf producers, including Saudi Arabia, UAE, and Qatar, are among the largest sulphur exporters in the world. Their combined contribution to the seaborne market means the strait closure is not just a trade disruption: it is a direct constraint on the physical availability of the primary feedstock for sulphuric acid globally.
Indonesia’s HPAL nickel industry sourced 76% of its sulphur imports from the Middle East in 2025, per Benchmark data. More than ten tonnes of sulphur are required to produce one tonne of nickel through the HPAL process. That dependency created an immediate production cost shock when the strait closed. Benchmark spot acid prices in Indonesia and Chile climbed above USD 380 and USD 440 per tonne respectively as converters scrambled for alternative supplies.
How the Cost Shock Has Repriced Battery Materials Economics
The numbers from Benchmark are material, not marginal. Sulphuric acid was a rounding error in hard-rock lithium conversion economics before the disruption, at around 3% of cost. It is now 11% and the largest single C1 cost component, above energy. That shift changes project-level breakeven calculations, unit economics for operating converters, and the relative competitiveness of different lithium processing pathways.
HPAL nickel has always been sulphur-intensive, but the scale of the cost increase is significant. Sulphur at 42% of HPAL costs, up from 26% before the conflict, means the economics of Indonesian HPAL operations have been structurally repriced. Projects that were competitive at previous acid costs are no longer breakeven at current prices. Producers cannot simply pass costs through in a market where nickel prices are set by LME trading rather than by downstream contract.
For purified phosphoric acid, the exposure is even more acute: sulphuric acid accounts for 59% of production costs, per Benchmark. Purified phosphoric acid is a key feedstock for lithium iron phosphate cathode production. The cost pass-through from a disrupted acid market runs directly into LFP battery costs at a time when LFP is capturing market share from NMC precisely because of its cost advantage. That cost advantage narrows when its feedstock is disrupted.
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Which Jurisdictions Are Exposed and Which Are Insulated
The exposure is not evenly distributed. Indonesia carries the highest combined risk in the nickel supply chain: large HPAL operations, 76% Middle East sulphur dependence, and no domestic sulphuric acid production capacity at scale. Australia’s hard-rock lithium converters are also exposed, importing sulphuric acid or sulphur for their processing operations. Neither jurisdiction has significant domestic acid production insulated from import dependency.
China is the exception. Domestic sulphuric acid production from Chinese copper, lead, and zinc smelting operations provides a large internal supply that insulates Chinese converters from the seaborne price shock. China also imposed unofficial restrictions on sulphuric acid exports during the disruption, which compounded the tightness for non-Chinese buyers while protecting Chinese producers. Jurisdictions with domestic acid capacity tied to base metal smelting have a structural cost advantage that has widened materially in 2026. The pattern repeats the one visible across the rare earth supply chain outside China, where refining capacity rather than geology sets the ceiling.
Australia is not among the insulated jurisdictions. Australian hard-rock spodumene converters depend on imported sulphuric acid. The disruption effectively widened the cost gap between Australian and Chinese processing, reinforcing the structural argument that value-added processing in Australia requires either domestic acid supply infrastructure or long-term contracted supply from jurisdictions outside the Hormuz corridor.
Physical Availability Is the Risk That Prices Cannot Capture
The more dangerous aspect of the current disruption is not the price. It is physical availability. Benchmark’s analysis explicitly distinguishes between price exposure and availability exposure. Damaged Gulf refining capacity does not recover quickly even if the Strait of Hormuz reopens. Refiners that have cut output because they cannot source sulphur do not restart operations the week after a shipping route clears. Supply chains have lead times.
Some refiners have already cut output because they cannot source the physical acid, not because they cannot afford it. That distinction matters for understanding the timeline of any recovery. When physical availability is the constraint, the problem does not resolve on a price signal. It resolves when new supply routes are established, when alternative sources are contracted, and when logistics infrastructure is rebuilt around the new configuration. That takes months, not days.
For the battery materials supply chain, the implications extend beyond 2026. Producers with contracted, diversified acid supply, or domestic production in insulated jurisdictions, are structurally advantaged relative to spot buyers in exposed geographies. Capital allocators evaluating new battery materials projects should be treating sulphuric acid supply as a first-order site selection and supply chain design criterion, not as a background operating cost assumption. It is the same test that sits underneath critical minerals bankability: whether a project can be financed, not whether the resource exists.
Key Takeaways
- Sulphuric acid prices more than doubled in some regions between late February and mid-April 2026 following the Strait of Hormuz closure. Sulphur is up more than 50%. The feedstock is a by-product of oil and gas refining and cannot be produced on demand.
- Hard-rock lithium acid costs have risen from 3% to 11% of C1 conversion cost, becoming the single largest cost line. HPAL nickel sulphur costs have risen from 26% to 42% of production costs. Over half of 2026 lithium, cobalt, rare earth, and PPA production is exposed to this disruption, per Benchmark Mineral Intelligence.
- Physical availability, not just price, is the binding constraint. Refiners have cut production because they cannot source sulphur. Recovery requires rebuilding supply routes and contracted supply chains, not just a price correction. Jurisdictions with domestic acid capacity, primarily China, are insulated. Australia and Indonesia are not.
FAQ
Why does the Strait of Hormuz closure affect sulphuric acid prices?
At least half of global seaborne sulphur trade passes through the Strait of Hormuz, according to Benchmark Mineral Intelligence. Sulphur is the primary feedstock for sulphuric acid and is produced as a by-product of oil and gas refining in the Gulf region. When the strait is closed, Gulf sulphur exports are blocked, creating physical supply shortages for acid producers globally. Between late February and mid-April 2026, this drove sulphuric acid prices to more than double in some regions and sulphur prices up more than 50%.
How much has sulphuric acid affected lithium and nickel production costs in 2026?
Per Benchmark Mineral Intelligence analysis from May 2026, sulphuric acid costs for hard-rock lithium conversion have risen from approximately 3% to 11% of C1 production cost, making it the single largest individual cost component, above energy. For HPAL nickel production, sulphur now represents 42% of production costs, up from 26% before the conflict. Sulphuric acid accounts for 59% of purified phosphoric acid production costs, impacting LFP battery feedstock economics.
Which battery materials are most exposed to the sulphuric acid supply crunch?
Benchmark Mineral Intelligence estimates that more than half of global lithium, cobalt, rare earth, and purified phosphoric acid production expected in 2026 is exposed to sulphur and sulphuric acid supply disruptions. High-purity manganese sulphate monohydrate, used in manganese-containing EV batteries, is 100% dependent on sulphuric acid supply. Indonesia’s HPAL nickel industry, the world’s largest, sourced 76% of its sulphur imports from the Middle East in 2025.
Why cannot acid-exposed producers simply buy more sulphuric acid at higher prices?
Physical availability, not just price, is the binding constraint in the current disruption. Some refiners have cut output because they cannot source physical sulphur, not because they cannot afford it. Damaged Gulf refining capacity does not recover quickly even if shipping routes reopen. Re-establishing supply chains for a commodity that trades in large volumes through long-term contracts and specialised logistics takes months. The disruption cannot be resolved by price alone because the physical material is not available at any price in some markets.
This analysis is from The Drill Down, a daily briefing on critical minerals, junior mining, and capital markets. Join 3,200+ investors and operators who read it before the market opens.
Sources
Benchmark Mineral Intelligence “What the sulphuric acid supply crunch means for critical minerals” May 2026; Canadian Mining Journal May 28, 2026; Northern Miner May 28, 2026; Mining.com May 28, 2026; The Assay May 2026.
Kamoa Capital is not licensed and does not know your circumstances. Nothing here is financial, legal or tax advice – seek professional advice and read any PDS before acting. We aim for accuracy but make no guarantees and accept no liability. Views are opinions only and may include forward-looking statements that may not occur.
