Iran Strait Closure Tightens Sulfur Supply, Raising Costs for Copper and Nickel Producers

Geopolitical shocks rarely stay confined to their original markets, and the Iran conflict is now demonstrating that pattern through a less obvious but highly consequential channel: sulfur. With the Strait of Hormuz closed since 28 February, sulfur availability has tightened across industrial supply chains, pushing up costs for copper and nickel producers that rely on sulfuric acid—an input whose demand is largely governed by agriculture.

How the sulfur shock reached metals

Sulfur is produced as a by-product of oil and gas refining in the Gulf. The chokepoint matters because it normally handles about a quarter of global sulfur production, according to the US Geological Survey. Once flows were constrained after the strait’s closure, the disruption moved quickly into a market that sits at the intersection of energy, fertilizer production and metals processing.

Why copper and nickel are exposed

Sulfur is converted into sulfuric acid, which is used in multiple industrial processes. In copper production, it is essential for solvent extraction and electrowinning (SX-EW), a method commonly used to process oxide ores. For nickel, sulfuric acid is a key input for high-pressure acid leach (HPAL) facilities that produce intermediate products such as mixed hydroxide precipitate (MHP).

The complication for metals producers is that sulfur is not primarily priced or allocated as a metals input. Roughly two-thirds of global sulfur demand goes to fertilizer production, meaning agriculture effectively sets priority during shortages. That allocation dynamic has already contributed to export restrictions across several major suppliers.

Export bans intensify the squeeze

Export controls are tightening supply further. The world’s largest producer of sulfuric acid, [[PRRS_LINK_2]], is set to ban exports from next month. Turkey has already imposed similar restrictions, according to Argus Media, while India is also weighing action. Prices have climbed to record levels.

For metals producers operating with limited buffers, timing is critical: many were already dealing with tight inventories and rising input costs before the latest disruption.

Copper risk: dependence on SX-EW chemistry

About 20% of global refined copper output relies on SX-EW technology, according to the International Copper Study Group—making this segment particularly sensitive to sulfuric acid availability. The Democratic Republic of Congo stands out as especially exposed: SX-EW accounts for around half of national output ([[PRRS_LINK_3]]), and much of its sulfur supply comes from the Gulf region.

Producers are responding in operational ways rather than waiting for prices alone to adjust. Some miners have begun rationing consumption; others have cancelled shipments or slowed operations to preserve chemical inventories.

[[PRRS_LINK_4]], another major copper producer, also faces exposure through its SX-EW output—about 1.125 million tonnes annually—and its reliance on China for roughly 20% of its sulfuric acid imports, according to Morgan Stanley. Chile may have some buffer because domestic sulfuric acid production from smelting by-products can delay impacts even if it cannot fully prevent them.

China’s export stance could shift pressures inside smelting

China’s own export restrictions may create internal distortions for copper processing economics. Chinese copper smelters have increasingly relied on selling sulfuric acid as revenue, particularly as treatment charges have fallen to historic lows—at times turning negative—making by-product acid more central to smelter profitability.

If exports are restricted further, domestic sulfur prices could ease inside China, benefiting fertilizer producers while potentially compressing margins for copper smelters. Some analysts anticipate temporary output cuts or maintenance shutdowns if conditions persist.

Nickel impact: Indonesia’s faster transmission through HPAL

The nickel effect is expected to show up more quickly than in copper because Indonesia—the world’s largest nickel producer—imports around 75% of its sulfur requirements from [[PRRS_LINK_5]], with additional supply coming from China.

HPAL production via [[PRRS_LINK_6]] is highly acid-intensive. Morgan Stanley estimates that producing one tonne of mixed hydroxide precipitate requires 25–30 tonnes of sulfuric acid. With MHP output around 450,000 tonnes annually and expected to rise by another 100,000 tonnes this year, the industry is moving into what Morgan Stanley characterizes as a period of structural input constraint; some Indonesian HPAL operators have already started reducing run rates as inventories tighten.

Costs are rising first; volumes may follow

The immediate consequence across both metals markets appears less like an instant volume collapse and more like cost inflation driven by higher sulfur prices. Macquarie estimates that since the start of the year the surge in sulfur prices has added about $4,000 per tonne to Indonesian HPAL nickel production costs, lifting the cost range to $14,500–$18,000 per tonne.

This cost pressure aligns with market moves: nickel has rallied recently with the London Metal Exchange price reaching an 11-week high of $18,655 per tonne. For copper SX-EW producers, Natixis estimates sulfur accounts for about 20% of cash operating costs; it calculates that each $100 per tonne increase in sulfur prices raises operating costs by roughly 4%. LME copper prices have climbed back above $13,000 per tonne for the first time in a month.

Agriculture remains the deciding factor

Even with volatility in metal markets, sulfur pricing retains a structural anchor in fertilizer demand. Because governments are likely to prioritize food security over industrial usage when supplies are tight, agriculture should continue receiving priority even if metals prices signal willingness to pay more.

The ceasefire test—and why it may not fully resolve competition

Markets are now watching whether a newly announced 10-day ceasefire can stabilize conditions enough for the Strait of Hormuz to reopen and restore normal sulfur flows. But even if geopolitical tensions ease temporarily, competition for constrained supply is unlikely to disappear quickly: fertiliser manufacturers will still compete alongside energy refiners and metals producers within a limited global base.

In that contest over scarce inputs—where allocation priorities ultimately follow food security—agriculture is expected to remain the decisive winner.