The US faces a supply crunch for sulfur, a key chemical for processing battery metals, as huge lithium projects move into production in coming years.

The bright yellow chemical is refined to make sulfuric acid, which is used to leach the ore of several battery metals including copper, nickel, cobalt and lithium. Demand for lithium-ion batteries is expected to skyrocket as the energy transition matures, and calls for sulfur will likely jump in tandem. The US was the world's No. 2 producer of sulfur in 2022, and China was No. 1, according to the US Geological Survey.

Three major projects are scheduled to come online in Nevada in 2026, which could pump up sulfur demand: Lithium Americas Corp.'s Lithium Nevada project known as Thacker Pass; Ioneer Ltd.'s Rhyolite Ridge property; and Century Lithium Corp.'s Clayton Valley project. These projects, alongside demand from ore leaching, are expected to increase sulfur demand by between 2 million metric tons and 3 MMt per year, according to forecasts by S&P Global Commodity Insights.

If US demand for sulfur exceeds domestic supply, it could threaten President Joe Biden's efforts to decouple the US economy from China. To avoid that result, ore processors would need to buy higher-cost sulfur from Canada.

"I would attribute all the additional demand [in the US] to the energy transition," said Yuya Pan, principal research analyst of sulfur and sulfuric acid at Commodity Insights. "With a continuous increase in sulfur demand from lithium projects, the US is expected to increase sulfur imports from Canada and reduce sulfur exports to Latin America."

High cost of sulfur

Demand for sulfur in the US will rise with the startup of domestic lithium projects, but declining interest in oil and gas refining will threaten supply as the energy transition progresses. There is also hesitance to use the Frasch process to extract sulfur from underground deposits due to its potential for environmental damage.

The Frasch process uses very hot water to melt underground deposits of elemental sulfur for extraction, and it was the primary method used until the 1970s. Around that time, sulfur started being recovered as a byproduct of oil refining and natural gas production.

"It's going to be expensive," Todd Fayram, senior vice president of metallurgy at Century Lithium, told Commodity Insights. "A lot of those Frasch processes, especially in the Gulf Coast and off the coast of California, have been shut down [and] nobody wants to deal with oil and gas, so there's less and less sulfur available out there."

Sulfur supply in the US dipped between 2020 and 2021 due to low demand for oil during the COVID-19 pandemic, in addition to several oil refinery closures between 2020 and 2022, Commodity Insights' Pan said. Sulfur supply has since resumed to pre-pandemic levels, but the outlook is bleak. The average contract price of sulfur coming out of Tampa, Fla., averaged $481 per metric ton in April, May and June of 2022, a four-year high, but it has dropped and landed at $103 as of June 2023, according to Commodity Insights data.

Limited domestic supplies of sulfur will have US-based miners looking to Canada to meet their needs, but not without raising shipping costs. Ioneer expects the transport of sulfur, along with soda ash and hydrated lime, to cost more than the raw materials themselves. Expenses for reagents will form the majority of operating costs for the company's Rhyolite Ridge operation, according to a feasibility study. To tackle the issue, the miner signed a long-term supply contract with Shell Canada Energy Ltd. in December 2022 for the annual purchase of up to 500,000 metric tons of high-quality sulfur.

"With this MOU, Ioneer takes another key step to secure sulfur for the Rhyolite Ridge lithium-boron project," the company said after the contract signing with Shell Canada. The company declined to comment further on the matter.

Lithium Americas flagged the availability of sulfuric acid as a key variable to determine production at Thacker Pass, according to the project's feasibility study. Yet the company has not signed any long-term contracts for sulfur to shield itself from possible price volatility.

"Lithium Americas is working with multiple potential suppliers and traders to feed the sulfuric acid plant at Thacker Pass. We are planning a flexible supply chain to ensure security of supply and to manage costs," a Lithium Americas spokesperson told Commodity Insights.

"Sulfur is a commodity with cyclical price movements. We mitigate short-term swings by planning with a long-term view," the spokesperson said.

Both companies will buy sulfur and refine it to sulfuric acid in-house to reduce costs.

Sulfur substitutes

Amid anticipation of a supply crunch, some miners are looking for alternatives. Century Lithium, formerly Cypress Development Corp., changed its business strategy after releasing a pre-feasibility study for the Clayton Valley project in August 2020. In the technical study, the company flagged the availability, cost and transportation of sulfur as possible limitations to production at Clayton Valley.

Century Lithium now plans to incorporate the chlor-alkali method at Clayton Valley in combination with direct lithium extraction. The chlor-alkali plant will generate two reagents required for processing, hydrochloric acid and sodium hydroxide, the company said.

"The sulfate guys are making a sulfate-based system. We're making a chloride-based system. So effectively, we're leaching and making a brine right out of our clay stocks," Fayram said.

New projects are currently not expected to come online until 2026, so the North American mining industry and the sulfur and sulfuric acid market have time to adapt to changing conditions.

"We are anticipating that the price [of sulfuric acid] will normalize before again increasing because we have seen a growing application of sulfuric acid in the mining industry, especially for the production of lithium," Rajib Barman told Commodity Insights. Barman is associate vice president of research and consulting for chemicals, materials, and oil and energy at Transparency Market Research, a research and consulting firm.

"This particular status quo will be maintained probably until the end of this year, maybe two or three more quarters, and then we definitely anticipate there will be an increment in the prices of sulfuric acid," Barman said.

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