A war in the Persian Gulf and new export restrictions from China have caused prices for sulfuric acid to more than double in key global markets, threatening to disrupt the production of everything from copper and computer chips to fertilizer.
"It’s getting to that critical point where inventories are being drawn down and production of critical minerals and agricultural products like phosphate, are slowing down,” said Craig Jorgenson, CEO of the industry group the Sulphur Institute.
Prices for sulfuric acid in top copper-producer Chile have surged by over 100% since the end of February, while prices in Indonesia have climbed more than 80%, according to commodities pricing agency Argus. The price hikes follow a dual shock to supply: a large portion of the world's sulfur, a key ingredient, has been cut off from Persian Gulf oil refineries due to the conflict, while China has curbed its own exports to ensure domestic food security.
The shortage of the world’s most-consumed chemical has far-reaching implications. Sulfuric acid is essential for leaching copper from ore, producing phosphate fertilizers, manufacturing semiconductors, and treating water. "There’s only weeks, maybe if you’re lucky a month, planned for in their pipeline and storage,” said Kunal Sinha, a former Glencore acid manager and current CEO of metals-processing startup Valor. “Supply-chain disruption, whether it’s a rail strike or the Strait of Hormuz being closed, is a problem.”
Chile and Indonesia Face Supply Squeeze
The markets most exposed to China’s export controls are Chile and Indonesia, according to Sarah Marlow, head of fertilizer pricing at Argus. Chile is the world’s largest importer of sulfuric acid, using it extensively to produce copper. In Indonesia, nickel miners who rely on Middle Eastern acid have reportedly started to reduce production of the metal, which is critical for electric-vehicle batteries.
Windfall for Some Producers
The supply crunch has created a lucrative opportunity for some companies. U.S. Gulf Coast refiners that process high-sulfur crude are seeing strong demand for their byproduct. In the Democratic Republic of the Congo, Ivanhoe Mines is generating approximately $1 million per day from sulfuric acid sales from its new Kamoa-Kakula copper smelter, the largest in Africa. "Now we get the payback," founder Robert Friedland said on a recent earnings call, referencing the higher cost of building a smelter that produces excess acid.
This article is for informational purposes only and does not constitute investment advice.
