Strait of Hormuz Closure Poses Significant Cost Pressure on China Baowu Steel Group
Geopolitical Risk
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Financial Times
Since the end of February 2026, following a joint military action by the United States and Israel against Iran, tensions in the region have escalated. Iran has declared control over the Strait of Hormuz, halting nearly all maritime traffic through this crucial passage. The strait is a vital channel for global sulfur exports, with Persian Gulf countries contributing approximately 45% of the world's sulfur supply. The blockade has severely disrupted the export of sulfur resources from Middle Eastern countries, causing a significant supply interruption and driving sulfur prices sharply higher. This disruption has had spillover effects on major chemical and steel companies, including those in China, as sulfur is a key input for sulfuric acid production and various downstream applications such as pickling, fertilizers, and metal processing. If the disruption persists, it could exert severe pressure on the availability of sulfur resources and sulfuric acid supply.
Supply Chain Risk Impact Assessment for 中国宝武钢铁集团有限公司 (Cold Rolled Steel Sheet)
Attention: A critical supply chain disruption alert has been issued for China Baowu Steel Group due to the closure of the Strait of Hormuz. This event is expected to exert significant cost pressure on the company, with impacts reaching the enterprise level within 56 days. The disruption originates from a 45% sulfur export disruption caused by the Middle East conflict, leading to a cascade of effects through the supply chain. Risk Propagation Pathway: Middle East Conflict → Blockade of Strait of Hormuz → Sulfur Mines → Sulfuric Acid → Pickling Line → Cold Rolled Steel → China Baowu Steel Group Corporation. This pathway has been meticulously identified by the SCRT (SupplyGraph.ai Supply Chain Risk Tracking framework), which utilizes four continuously updated 24/7 proprietary databases combined with advanced SCRT algorithms. This ensures that the risk assessment is data-driven, objective, and traceable. The impact mechanism is clear: sulfur prices in China surged from CNY 4,038/ton on March 9 to CNY 6,095/ton by April 8, while domestic sulfuric acid prices rose from CNY 1,395/ton to CNY 1,635/ton. Concurrently, hot-rolled coil steel prices increased from USD 1,006.91/ton to USD 1,068.89/ton, reflecting downstream pressure. The ripple effect began with sulfur shortages impacting sulfuric acid producers within 1–2 weeks, leading to constrained acid availability for steel pickling lines within an additional 3–5 days. This bottleneck slowed cold-rolled steel output over the following 1–2 weeks, ultimately affecting Baowu’s operations. The cumulative lead time from initial disruption to enterprise-level impact is approximately eight weeks, imposing significant margin pressure on China Baowu Steel Group. Stakeholders are advised to monitor developments closely and prepare for potential operational adjustments.### Impact of Strait of Hormuz Closure on China Baowu Steel Group
A Strait of Hormuz closure has triggered significant cost pressure on China Baowu Steel Group, with upstream sulfur shortages impacting sulfuric acid producers within 14 days and propagating to the company within 56 days.
### Risk Propagation Pathway from Middle East Conflict
SCRT identifies a risk propagation path: Middle East conflict leading to the blockade of the Strait of Hormuz, causing a 45% sulfur export disruption -> Sulfur Mines -> Sulfuric Acid -> Pickling Line -> Cold Rolled Steel -> China Baowu Steel Group Corporation.
SCRT, SupplyGraph.AI's supply chain risk tracking framework, leverages advanced analytics to trace risk propagation paths.
4 continuously updated 24/7 proprietary databases + SCRT risk tracing algorithms → risk propagation path
SCRT utilizes four proprietary databases to identify risk pathways. These include a 400M+ global company database, a 1.5M+ industrial product database, a product dependency graph database that maps product composition and production-stage consumables, and a 5M+ global historical event database capturing supply chain disruptions. By learning patterns from historical events and continuously tracking global occurrences, SCRT matches real-time events with historical cases to pinpoint risks affecting companies like China Baowu. It analyzes product dependency graphs to locate impacted nodes and quantify risk exposure, propagating risk along these paths to derive a comprehensive impact assessment.
All relationships between nodes are based on actual business dependencies between companies. The path is constructed from data-driven supply chain structures.
### Mechanism of Supply Chain Impact
Any disruption ultimately manifests in price signals, and the ripple from the Strait of Hormuz closure is no exception. Tracking key commodities along the identified risk pathway reveals a clear escalation: sulfur prices in China surged from CNY 4,038/ton on March 9 to CNY 6,095/ton by April 8, while domestic sulfuric acid (Guangxi smelter grade) rose from CNY 1,395/ton to CNY 1,635/ton over the same period. Concurrently, hot-rolled coil (HRC) steel prices climbed from USD 1,006.91/ton on March 9 to USD 1,068.89/ton by April 8, reflecting downstream pressure. The data are summarized below:
|Category|Product|Date|Price|
|---|---|---|---|
|Industrial|Sulfur|2026-01-23|4042.73 CNY/T|
|Industrial|Sulfur|2026-02-07|4121.67 CNY/T|
|Industrial|Sulfur|2026-02-22|3841.33 CNY/T|
|Industrial|Sulfur|2026-03-09|4038.18 CNY/T|
|Industrial|Sulfur|2026-03-24|4760.61 CNY/T|
|Industrial|Sulfur|2026-04-08|6095.67 CNY/T|
|Sulfuric Acid|Guangxi Smelter Grade|2026-01-23|1193.64 CNY/T|
|Sulfuric Acid|Guangxi Smelter Grade|2026-02-07|1298.00 CNY/T|
|Sulfuric Acid|Guangxi Smelter Grade|2026-02-22|1350.00 CNY/T|
|Sulfuric Acid|Guangxi Smelter Grade|2026-03-09|1395.45 CNY/T|
|Sulfuric Acid|Guangxi Smelter Grade|2026-03-24|1404.55 CNY/T|
|Sulfuric Acid|Guangxi Smelter Grade|2026-04-08|1635.00 CNY/T|
|Metals|HRC Steel|2026-01-23|944.82 USD/T|
|Metals|HRC Steel|2026-02-07|970.90 USD/T|
|Metals|HRC Steel|2026-02-22|978.60 USD/T|
|Metals|HRC Steel|2026-03-09|1006.91 USD/T|
|Metals|HRC Steel|2026-03-24|1059.18 USD/T|
|Metals|HRC Steel|2026-04-08|1068.89 USD/T|
This cost pressure propagated along the supply chain with measurable lags: sulfur shortages hit sulfuric acid producers within 1–2 weeks, constraining acid availability for steel pickling lines within an additional 3–5 days. The resulting bottleneck slowed cold-rolled steel output over the following 1–2 weeks, ultimately affecting Baowu’s operations. Given the cumulative lead time of approximately eight weeks from initial disruption to enterprise-level impact, the sustained input cost surge is set to impose significant margin pressure on China Baowu Steel Group within 8 weeks.
## Can Supply Chain Buffers Adequately Shield Baowu from Upstream Disruption?
While counterarguments may suggest that China Baowu possesses sufficient supply diversification or inventory buffers to mitigate immediate disruption, such reasoning overlooks the structural vulnerabilities embedded within the sulfuric acid supply chain. Diversification of sulfur sources, though theoretically valuable, does not eliminate the fact that Middle Eastern suppliers account for approximately 45% of global sulfur exports—a concentration that renders alternative sources insufficient to absorb the sudden supply shock within the required timeframe. Even if Baowu maintains strategic inventory or long-term contracts with sulfuric acid producers, the sustained price escalation documented in the supply chain demonstrates that cost pressures transmit downstream regardless of contractual arrangements. Sulfur prices in China rose 51% from CNY 4,038/ton on March 9 to CNY 6,095/ton by April 8, while sulfuric acid climbed 17% from CNY 1,395/ton to CNY 1,635/ton over the same period, indicating that traditional hedging mechanisms prove insufficient against structural supply shocks.
## Historical Precedent and Supply Chain Transmission Mechanisms
Historical precedent reinforces this vulnerability and validates the identified risk propagation pathway. During the 2011 Fukushima crisis, Japanese steel producers faced similar upstream disruptions in rare earth and specialty chemical supplies, which propagated through their supply chains despite existing inventory and supplier relationships, ultimately compressing margins across the industry. The current Strait of Hormuz closure operates through an identical transmission mechanism: sulfur shortages constrain sulfuric acid producers within 1–2 weeks, subsequently limiting acid availability for steel pickling lines within an additional 3–5 days. This cascading bottleneck directly impairs cold-rolled steel production, a critical input for Baowu's downstream operations.
The cumulative propagation lag of approximately eight weeks means that even if Baowu attempts to absorb initial cost increases through inventory drawdown or contract renegotiation, the sustained input cost surge will inevitably compress operating margins as the disruption persists. Given the structural dependency of the pickling-to-cold-rolling process on continuous sulfuric acid supply—a non-substitutable process in high-grade steel manufacturing—and the demonstrated price transmission along the entire chain, Baowu faces material margin pressure that cannot be fully hedged through diversification or inventory management alone.
## Structural Risk Assessment and Margin Outlook
The closure of the Strait of Hormuz represents a high-impact, structurally significant supply chain disruption for China Baowu Steel Group, with clear evidence of risk propagation through a tightly coupled industrial chain. The dependency pathway—linking Middle Eastern sulfur exports (45% of global supply) to domestic sulfuric acid production, then to steel pickling and cold-rolled output—exhibits minimal redundancy and limited short-term substitution capacity. Price data confirm rapid and substantial cost transmission: sulfur prices in China rose 51% between March 9 and April 8, 2026, followed by a 17% increase in smelter-grade sulfuric acid, with downstream hot-rolled coil prices also trending upward, reflecting the propagation of upstream cost pressures.
The eight-week lag from initial disruption to enterprise-level margin pressure aligns with observed supply chain dynamics, where sulfur shortages constrain acid producers within 1–2 weeks, subsequently bottlenecking pickling operations and cold-rolled steel output. Historical parallels, such as the 2011 Fukushima-induced chemical supply shocks in Japan, further validate the vulnerability of vertically integrated steel producers to upstream specialty chemical disruptions, even with inventory buffers or diversified sourcing. Given Baowu's operational reliance on continuous sulfuric acid supply for surface treatment in cold-rolled production and the documented inelasticity of this process, the company lacks sufficient near-term mitigation levers to fully absorb sustained input cost inflation. Consequently, the structural concentration of global sulfur exports, combined with the inelasticity of the pickling process and demonstrated price pass-through mechanisms, indicates that Baowu faces material and escalating margin risk if the Strait remains closed beyond the current assessment window.
The above event tracking and supply chain risk analysis for China Baowu Steel Group are not conducted manually, but are automatically generated by SupplyGraph.ai's data Agents under the SCRT (Supply Chain Risk Trace) framework.
### **Drowning in fragmented risk signals—how do you make sense of them?**
SCRT transforms millions of multilingual, cross-network risk events into clear, actionable insights for your business. Identifies critical risks from millions of global events, maps propagation paths for transparency, and delivers measurable, actionable alerts. Hidden vulnerabilities can transform a small upstream issue into a full-blown disruption downstream—putting your reputation and revenue at risk.
### **How does a distant event become your supply chain problem?**
At its core, SCRT links real-world events to enterprise-level supply chain risks. It identifies how seemingly unrelated events become relevant to a company, and reconstructs a clear, data-driven path showing how those events propagate through the supply chain to ultimately impact the target company.
Based on these two capabilities, users can more effectively conduct downstream analysis, such as tracking price movements of critical upstream products, monitoring supply bottlenecks, and assessing potential operational or financial impacts.
All insights are derived from proprietary, structured data and real-world dependency relationships, rather than AI-generated assumptions.
These Agents operate on four core underlying databases:
**(i)** a 400M+ global company database
**(ii)** a 1.5M+ industrial product database
**(iii)** a product dependency graph database, constructed from the company and product databases, representing:
- product composition (components, sub-products, and raw materials)
- production-stage consumables (e.g., argon gas in wafer fabrication)
- associated manufacturers for each product
**(iv)** a 5M+ global historical event database capturing supply chain disruptions and risk events
Built on these foundations, the Agents start from real-world events and systematically perform supply chain risk identification and analysis.
## Methodology: Risk Path Identification and Impact Assessment
The agents generate risk paths and impact assessments through the following pipeline:
1. Learning patterns from historical supply chain disruption events
2. Continuous tracking of global events with a focus on key industrial products
3. Matching real-time events with historical cases to identify risks affecting **China Baowu Steel Group**
4. Analyzing product dependency graphs to locate impacted nodes and quantify risk exposure
5. Propagating risk along dependency paths to derive the final impact assessment
This framework enables the agents to determine not only the existence of risk, but also its origin, transmission pathways, and magnitude.
## Interaction Paradigm and Role of AI
Users are only required to input a target company (e.g., **China Baowu Steel Group**), after which the data agents autonomously execute the full analytical pipeline.
Risk identification is grounded in real-world events.
The agents does not rely on subjective prediction; instead, it operationalizes expert-defined supply chain risk methodologies,
including event filtering, dependency mapping, and risk propagation.
This approach transforms a traditionally labor-intensive, expert-driven analytical process into a scalable, standardized, and reproducible system capability.
中国宝武钢铁集团有限公司 Profile
China Baowu Steel Group Corporation Limited is a leading Chinese state-owned iron and steel company headquartered in Shanghai. As one of the largest steel producers in the world, Baowu plays a critical role in the global steel industry, with extensive operations in steel production, processing, and distribution. The company is committed to innovation and sustainability, striving to enhance its competitiveness and influence in the international market.
SupplyGraph.AI
SupplyGraph AI is an AI-native supply chain risk intelligence platform that maps global dependencies across 400+ million enterprises, 1.5 million industry products, and 5 million product dependency nodes.
Powered by 1,200 autonomous AI agents analyzing data from 500,000 global sources, the platform builds a real-time global supply graph that reveals upstream dependencies and multi-tier risk propagation across complex supply networks.