The Confidence No One Priced

The last piece was about confidence in governments — a widening bond spread, a credit downgrade, the market pricing whether a state can service its own debt. This one is about a quieter kind of confidence: the assumption, held by almost nobody consciously, that a raw material nobody actually manages would simply keep showing up. That assumption broke this year, and the crack is still spreading through three separate metal and fertiliser markets.

A byproduct, not a commodity

Sulfur is not mined to meet demand. It's recovered as a byproduct of refining sour crude oil and processing natural gas — a waste stream, essentially, that the petroleum industry happens to also sell. That has one consequence almost nobody thinks about until it stops being true: sulfur supply doesn't respond to sulfur prices. No refiner runs more crude because sulfuric acid buyers in Chile are desperate. Recovery volumes track hydrocarbon throughput and crude sulfur content — decisions made for entirely different reasons, by entirely different buyers. When the flow of that byproduct is interrupted at its source, there is no price high enough to summon more of it quickly. That's the setup for everything that follows.

The closure

On 28 February 2026, the Strait of Hormuz closed to commercial dry bulk traffic amid the Iran conflict. Global sulfur exports fell 45% below their end-of-February level almost immediately. By April, more than 600,000 tonnes of sulfur sat stranded on vessels in the Middle East Gulf, unable to pass. Six weeks later, on 10 April, China moved to close the other tap: a full export ban on sulfuric acid, replacing what had been a 700,000-tonne annual quota with a complete halt that ran through August. China had been the flexible secondary source the rest of the world leaned on when Gulf supply tightened. With both the primary chokepoint and the fallback closed within six weeks of each other, there was no third source to lean on.

Copper: a split exposure

Sulfuric acid is the reagent in solvent extraction-electrowinning (SX-EW), the process used for roughly 15% of global copper cathode output, and consumption scales steeply with ore quality — from around 3 tonnes of acid per tonne of copper on high-grade ore up to 22 tonnes per tonne on the ultra-low-grade ore many mines have been pushed toward as easy deposits run out. That exposure isn't evenly spread. BHP's Escondida and Antofagasta plc both buy their acid on the seaborne market and were hit directly. Codelco, Chile's state producer, generates its own acid as a byproduct of smelting its own concentrate, which insulated it almost entirely. Two of the world's largest copper operations, sitting in the same country, ended up on opposite sides of the same shock — one because it depends on a global market, the other because it doesn't.

Nickel: no partial setting

Indonesian HPAL (high-pressure acid leach) plants, which process the nickel ore feeding much of the EV battery supply chain, typically import 75–80% of their sulfur from the Middle East Gulf. HPAL has no low-power mode — it runs at full rate or it doesn't run. Huayou, one of the larger Chinese-backed operators in Indonesia, announced it would cut output at its Huafei Nickel Cobalt HPAL plant by roughly 50%, halting some production lines from 1 May with no set restart date, citing sulfur costs that had pushed feedstock above 50% of total production cost. Spot sulfur delivered to Indonesia had by then passed $800 a tonne. At that cost structure, running the plant stopped making economic sense, and there was no partial dial-back available — only off.

Fertiliser: the quieter cascade

The same acid shortage reaches agriculture through phosphate fertiliser production, which also depends on sulfuric acid. OCP, Morocco's state phosphate producer and one of the world's largest, received its last Middle East Gulf cargo — the vessel Kallone, at the port of Jorf Lasfar — on the same day China's export ban took effect, and has been leaning on Russian supply since. In the US, Mosaic cut domestic phosphate output by roughly 2 million tonnes as elevated acid costs made some production uneconomic. Both are upstream of the food price story that shows up much later, at the grocery aisle rather than the metals desk.

Where this connects back

This is confidence in a different register than the sovereign-debt version, but it's the same underlying failure: a system that had been priced as though it would keep working smoothly, doing so for long enough that almost nobody was pricing the alternative. Nobody was hedging sulfur logistics risk in January, because a closed strait cascading into copper, nickel and fertiliser within two months wasn't in anyone's base case. It is a live example of the point this framework keeps returning to — that the more confident markets are in an arrangement's permanence, the less it takes to reveal how little confidence was ever actually warranted. And the cost side of this cascade — pricier acid, pricier nickel and copper, pricier fertiliser and eventually food — feeds directly into the inflation numbers behind the real-yield line on the indicators panel. Supply shocks and sovereign confidence aren't separate stories this year. They're arriving through the same door.

Write it down

Pick one assumption you're currently not pricing — a supply chain, a trade route, an institution — because it has simply always worked. Write down what would have to happen for it to stop working, and how you'd find out. You won't get the specific trigger right. The value is in having asked the question before the strait closes, not after.

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