Sulfur supply shocks reshape nickel costs, to help GCC producers overcome Gulf reliance

Middle East sulfur supply disruptions are sharply raising costs for Indonesia's nickel producers and tightening sulfuric acid availability for copper plants. However, they may well accelerate the rise of alternative and recycling-derived sulfur feedstocks, while prompting Gulf Cooperation Council producers to overcome reliance on the Strait of Hormuz, according to panelists speaking at a webinar dedicated to sulfur's impact on global metal value chains held by the London Metal Exchange on July 13.

As high-pressure acid leach (HPAL) producers need roughly 10 tons of sulfur per ton of nickel, every $100 increase in sulfur prices adds about $1,000 to their costs, according to Jim Lennon, managing director of Red Door Research.

He noted that sulfur prices had been rising rapidly even before the Middle Eastern problems, climbing from $200/mt at the beginning of 2025 to $500/mt by year-end, but the resulting $3,000/mt inflation in nickel cost was offset by cobalt price gains owed to the DRC suspending cobalt exports.

Last year's increase in sulfur prices had no impact on the nickel market, but that has changed over the last four to five months, Lennon said.

Indonesia could double sulfur output

Indonesia, which accounts for 65% of global nickel supply, imported 5 million -- 5.3 million mt of sulfur last year, with 75% coming from the Middle East. Imports in the first six months of 2026 are down 30% year over year, according to Lennon.

"HPAL producers in Indonesia, which had been at the bottom of the cost curve, are now at the top. We've seen some of them being forced to cut production by up to 50% as a result," said Lennon, adding that HPAL producers are not making money paying $1,100-$1,200/mt for sulfur.

Sulfur shortages are already accelerating the search for alternatives to Middle Eastern supply, including pyrite-based acid production, acid recycling and gypsum use, as higher prices improve the economics of unconventional feedstocks, panelists observed.

Projects underway could double Indonesia's sulfur production to 1 million mt/year over the next few years from 450,000 mt in 2025, according to Lennon. Even if sulfur prices fall back to $800-$900/mt, the impact on the nickel industry's cost structure will be long-lasting, he reckons.

For copper producers, the sulfur disruption is less about price than availability, according to Hamish Sampson, copper analyst at Trafigura.

Chilean plants more stressed

About 80% of global copper mine production is converted into concentrate for smelters, while about one-fifth is processed through leaching, with the DRC, Chile and the US the key leaching states and so requiring the most sulfur for their copper industry, according to Sampson.

Half of the traded sulfur supply – 20 million mt/year – passed through the Strait of Hormuz. About 10% of those flows went to South Africa, where the DRC has been driving copper supply over the last five years, said the analyst.

"With every lost ton of sulfur formerly going into Durban, Darussalam and other ports, you are losing about one ton of copper from the African Copperbelt," said Sampson.

However, he said the DRC entered the crisis with relatively high inventories and has secured replacement cargoes from the US Gulf Coast and Vancouver after roughly 2 million mt/year of Middle Eastern sulfur supplies dried up.

Chilean SX-EW [Solvent Extraction and Electrowinning] plants are more stressed, according to Sampson.

Chile consumes about 9 million mt/year of sulfuric acid, including 4 million mt of imports, of which China supplied 1.5 million mt/year before imposing a near-total sulfuric export ban in May 2026, and "to lose those volumes was quite seismic," Sampson said.

Consumption ratios are also higher in Chile. "Whereas in the DRC, you need about 3 to 4 tons of sulfuric acid for every ton of copper produced, in Chile, the requirements range from 2 to 15 tons," he said.

He and other panelists also mentioned how things are falling out in Russia and Kazakhstan, which together exported over 4 million mt/year of sulfur, before Russia suspended its exports in late 2025, and in May 2026, also halted the transit of Kazakh sulfur through its ports, according to a May 28 post on X by Robert Friedland, founder of Ivanhoe Mines.

"Even if the Middle East region resolves itself, we will still have the issue with Russia and Kazakhstan," said Sampson.

The panelists nevertheless agreed that the Middle East will remain one of the world's most reliable sulfur suppliers.

"There are presently geopolitical headlines and short-term volatility, but long term the fundamentals don't change, and we don't recommend moving away from these traditional sources," said Nicolas Benzazon, a commodities industry analyst at trading group, Aglobis.

Because of the region's dominant role in sulfur exports, its producers are likely to emerge from this "almost existential crisis" with significant logistical changes, according to Peter Harrisson, sulfur market analyst at CRU.

"If you look at the investments that are likely to happen, it is reasonable to expect to see Middle East producers trying to diversify their own loading destinations, to change where their reliance sits, because they do not want to be unable to move $70 million vessels of sulfur because somebody has decided they can't," said Harrisson, and cited pipeline, conveyor and rail projects to get from the inside to the outside of the Persian Gulf.

Notionally stranded stocks

"If you're selling $1,000/mt sulfur, you are generating more than enough capital to pay for some of these projects. In the interim, the crisis will add value to anybody else's sulfur that is unstuck. Canadian volumes, Southeast Asian volumes, all of that product is fundamentally more valuable than it's ever been," he said.

Whether the sulfur price rally could unfreeze a portion of global sulfur supply that is effectively stranded in landlocked or remote locations remains to be seen, panelists said.

Canada's Northern Alberta alone holds 10 million mt of stocks, but moving them to the nearest seaport requires a 1,500-km journey. Similar logistical constraints prevent moving stockpiles accumulated in Central Asia, according to Sampson and Harrisson.