The war in Iran has already destabilised global aluminium markets, but its secondary effects are now spreading deeper into industrial metals, with copper and nickel producers facing a tightening sulfur supply squeeze that threatens to raise costs and disrupt output across multiple regions.
At the centre of the disruption is sulfur, a by-product of oil and gas refining in the Gulf. Flows from the region have been severely constrained since the closure of the Strait of Hormuz on 28 February — a chokepoint that normally handles roughly a quarter of global sulfur production, according to the US Geological Survey. The result is a fast-moving shock to a market that sits at the intersection of energy, agriculture, and metals processing.
Why sulfur matters to copper and nickel production
Sulfur is converted into sulfuric acid, a critical reagent used in several major industrial processes. In copper production, it is essential for solvent extraction and electrowinning (SX-EW), a method widely used to process oxide ores. In nickel, it is a key input for high-pressure acid leach (HPAL) facilities, which produce intermediate products such as mixed hydroxide precipitate (MHP). The complication is that sulfur is not primarily a metals market input. Roughly two-thirds of global sulfur demand is absorbed by fertiliser production, meaning agriculture effectively sets the priority in allocation during shortages. That dynamic is now driving export restrictions across multiple major suppliers.
Export bans tighten global supply
China, the world’s largest producer of sulfuric acid, is set to ban exports from next month. Turkey has already imposed similar restrictions, according to Argus Media, while India is also weighing a move in the same direction. The result is an accelerating global sulfur squeeze, with prices already reaching record levels. For metals producers, the timing is particularly difficult. Many were already operating with tight inventories and rising input costs before the latest disruption.
Copper faces a multi-layered supply threat
Around 20% of global refined copper output relies on SX-EW technology, according to the International Copper Study Group. That makes the sector highly exposed to sulfuric acid availability. The Democratic Republic of Congo is especially vulnerable. SX-EW accounts for around half of national copper output, and much of its sulfur supply is imported from the Gulf region.
Producers are already reacting. Some miners have begun rationing consumption, while others have cancelled shipments or slowed operations to preserve chemical inventories. Chile, the world’s largest copper producer, is also exposed. It produces roughly 1.125 million tonnes of SX-EW copper annually and depends on China for about 20% of its sulfuric acid imports, according to Morgan Stanley. Chile has some buffer capacity due to domestic sulfuric acid production from smelting by-products — which may delay, but not eliminate, the impact.
China’s export ban creates internal market tensions
Ironically, China’s own export restrictions may create domestic distortions. Chinese copper smelters have increasingly relied on sulfuric acid sales as a revenue stream, particularly as treatment charges have collapsed to historic lows — in some cases turning negative. That shift has made by-product acid a key part of smelter economics.
Restricting exports is likely to ease domestic sulfur prices, which benefits fertiliser producers but could pressure copper smelter margins. Some analysts expect temporary output cuts or maintenance shutdowns if conditions persist.
Nickel producers in Indonesia feel the squeeze faster
The impact on nickel is expected to materialise more quickly than in copper. Indonesia, the world’s largest nickel producer, imports around 75% of its sulfur requirements from the Middle East, alongside additional supply from China.
Nickel production via HPAL is highly acid-intensive. Estimates from Morgan Stanley suggest that producing one tonne of mixed hydroxide precipitate requires 25–30 tonnes of sulfuric acid. With MHP output already around 450,000 tonnes annually and expected to rise by another 100,000 tonnes this year, the industry is scaling into a period of structural input constraint. Some Indonesian HPAL operators have already begun reducing run rates as inventories tighten.
Cost inflation spreads through nickel and copper curves
The most immediate impact is not yet volume loss, but cost inflation. Macquarie estimates that the surge in sulfur prices since the start of the year has added roughly $4,000 per tonne to Indonesian HPAL nickel production costs, pushing the cost range to $14,500–$18,000 per tonne.
That shift helps explain nickel’s recent rally, with the London Metal Exchange price hitting an 11-week high of $18,655 per tonne. In copper, Natixis estimates sulfur accounts for about 20% of cash operating costs in SX-EW production. Every $100 per tonne increase in sulfur prices raises operating costs by roughly 4%, the bank calculates. Those cost pressures are now feeding into a broader bullish narrative for copper, with LME prices climbing back above $13,000 per tonne for the first time in a month.
Agriculture remains the structural price anchor
Despite the volatility in metals markets, sulfur pricing remains fundamentally anchored to agriculture. Because fertiliser production accounts for the majority of global demand, governments are likely to prioritise food security over industrial usage during shortages. That means copper and nickel producers are structurally second in line for supply — regardless of price signals.
The ceasefire question
Markets are now focused on whether a newly announced 10-day ceasefire in the Iran conflict can stabilise the situation and allow the Strait of Hormuz to reopen, restoring normal sulfur flows. Even if geopolitical tensions ease, however, structural competition for sulfur is unlikely to disappear. Metals producers, fertiliser manufacturers, and energy refiners will continue to compete for a constrained supply base. And in that competition, agriculture is expected to remain the decisive winner.
