Strait of Hormuz Closure Threatens EV Battery Production

The closure of the Strait of Hormuz has far-reaching consequences beyond just oil prices. The manufacturing process for electric vehicle batteries is also affected, as it relies on sulphuric acid to extract metals like nickel and lithium.

Sulphuric acid is a crucial component in extracting battery-grade nickel from Indonesian mines and lithium from Australian deposits. However, the Strait of Hormuz has seen a significant decline in sulphur shipments since the US-Iran conflict began. In March, only 180,000 metric tons were transported through the strait, down from an average of 1.27 million tons per month prior to the conflict.

The reduced supply of sulphur has driven up prices, with delivered prices to Asia reaching $880 a ton, a 50% increase since the start of the war. This could lead to production curtailment for miners in Indonesia, Australia, and Chile if they are unable to secure enough sulphuric acid.

The impact is not limited to metals processing; aluminium supplies from the Strait of Hormuz have also been affected. In April, only 20,000 tons were transported through the strait, down from an average of 1.26 million tons per month prior to the conflict. This has led to a shortage in India, affecting the production of Diet Coke, which is sold in aluminium cans.