Seven weeks ago, in The Acid Test, I mapped the chain nobody was watching: Hormuz closure → sulfur shortage → metal processing collapse → EV battery disruption. It was a prediction. Now it’s a curtailment notice.
What Changed
Two things happened in the same week.
On May 1, China suspended all exports of industrial sulfuric acid. Not restricted—suspended. Only electronic-grade high-purity acid, with special approval, can leave the country.
In the same week, Huayou Cobalt’s Huafei plant—a 120,000-tonne-per-year HPAL facility at Weda Bay—cut production by 50%. The stated reason: sulfur costs had made half their output uneconomic.
These two events are not coincidental. They are the same event, viewed from opposite ends of the same chain.
The Price Says It All
Sulfur delivered to Indonesia: above $800/tonne. Sulfur FOB US Gulf: $1,060/tonne as of May 6. CFR Brazil: $1,150/tonne.
Eighteen months ago, sulfur cost $150/tonne. The price has risen 7x.
This matters because HPAL processing—the method Indonesia uses to turn laterite ore into battery-grade nickel—consumes 10 to 12 tonnes of sulfur for every tonne of nickel produced. Sulfur was already 25–30% of operating costs before the war. At $800+, it’s approaching 50%. Some plants are producing at a loss. Others have simply stopped.
Who’s Cutting
| Company | Facility | Action | Impact |
|---|---|---|---|
| Huayou Cobalt | Huafei (Weda Bay IWIP) | 50% output cut, May 1 | ~60,000t Ni/yr lost |
| Lygend Resources | HPAL (IMIP/IWIP) | 10%+ cut since March | Material |
| Tsingshan Group | Multiple (IMIP) | 10%+ cut since March | Material |
| Eramet | Weda Bay Mining | Care & maintenance | 12M t ore quota exhausted |
The total MHP capacity at risk: roughly 450,000 tonnes, representing 10–15% of global battery-grade nickel supply.
The Three Bans
The Middle East supplies ~50% of the world’s seaborne sulfur. When Hormuz closed, the market looked for alternatives. It found three doors, all closing:
- China — Sulfuric acid export ban, effective May 1, 2026. World’s largest producer. “No, the rest of the world cannot fill the void.”
- Turkey — Sulfur export ban, effective April 2026. Domestic scarcity.
- Russia — Sulfur export ban extended through June 2026.
Among the world’s 10 largest sulfur importers, seven source over 40% from the Middle East. Five exceed 50%. There is no alternative supplier at the scale Indonesia needs.
The Downstream
This is where the chain gets long. Indonesia produces ~65% of global nickel. Most of it goes through Chinese-backed HPAL plants that produce mixed hydroxide precipitate (MHP). That MHP ships to China, where it’s converted to nickel sulfate, then to NCM cathode material, then to lithium-ion battery cells, then to electric vehicles.
The companies exposed: CATL, BYD, Samsung SDI, LG Energy Solution, SK On, Panasonic—every major cell manufacturer sources nickel through this chain. Automakers downstream: Tesla, BMW, Volkswagen, Hyundai, Ford, GM.
LME nickel is at $18,900/tonne, near a two-year high. The International Nickel Study Group has revised its outlook to a 32,000-tonne deficit.
Why This Is Different from Quota Cuts
Indonesia also independently cut mining quotas 30% this year (250–270 million wet metric tonnes, down from 379 million in 2025). That was a policy choice—price support, environmental enforcement, revenue strategy. It was planned.
The sulfur crisis is unplanned. It compounds the quota cuts. A plant that can’t get ore because of quotas AND can’t get sulfur because of war AND can’t import sulfuric acid because of China’s ban is not facing one problem. It’s facing three, simultaneously, with no workaround for any of them.
This is chokepoint contagion—a war about oil in the Persian Gulf, cascading through an invisible byproduct, into nickel processing in Sulawesi, into battery plants in Changsha, into car factories in Grünheide and Fremont.
The acid test was a prediction. The acid trap is the result. Both doors closed. Inventory is measured in weeks. And the chain from Hormuz to your next EV runs through every one of them.