Middle East Shipping Disruptions Pose Cost and Delivery Risks to China Baowu Steel Group

### Significant Impact on China Baowu Steel Group China Baowu Steel Group faces significant cost and delivery pressure from upstream sulfur-driven supply chain disruptions, with initial impacts on nickel alloy output within 14 days and full operational effects materializing within 56 days. ### Risk Propagation Pathway SCRT identifies a risk propagation path: Middle East shipping disruptions threaten sulfur supply to Indonesian nickel refineries -> Nickel Alloy -> Electric Arc Furnace -> Stainless Steel Plate -> China Baowu Steel Group Corporation. SCRT, SupplyGraph.AI's supply chain risk tracing framework, leverages advanced analytics to map risk pathways. 4 continuously updated 24/7 proprietary databases + SCRT risk tracing algorithms → risk propagation path SCRT utilizes four proprietary 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, production-stage consumables, and associated manufacturers, and (iv) a 5M+ global historical event database capturing supply chain disruptions and risk events. By learning patterns from historical supply chain disruption events and continuously tracking global events with a focus on key industrial products, SCRT matches real-time events with historical cases to identify risks affecting China Baowu Steel Group. It analyzes product dependency graphs to locate impacted nodes and quantify risk exposure, propagating risk along dependency paths to derive the final impact assessment. All relationships between nodes are based on real business dependencies between companies. The path is constructed on a data-driven supply chain structure. ### Mechanism of Supply Chain Impact Any disruption ultimately manifests in price signals, and recent data confirm mounting pressure along the sulfur-to-steel chain. Tracking key inputs reveals a sharp divergence: while nickel prices softened from $18,115.45/tonne on January 23, 2026, to $17,186.82/tonne by April 8, sulfur prices surged from ¥4,042.73/tonne to ¥6,159.70/tonne over the same period—a 52% increase. Nickel pig iron, a critical intermediate alloy, rose steadily from $791.60/nickel to $855.60/nickel. These trends reflect tightening sulfur availability due to shipping disruptions in the Strait of Hormuz, which directly constrain sulfuric acid production for nickel leaching in Indonesia. The resulting cost and supply pressure transmits downstream with measurable lags: sulfur shortages impact nickel alloy output within 1–2 weeks, per procurement cycles; nickel alloy constraints then affect electric arc furnace operations after 2–4 weeks as inventories deplete; stainless steel production slows 1–2 weeks later due to furnace scheduling; and finally, Baowu Steel faces input cost and delivery pressure within another 1–2 weeks, dictated by its order and stock structure. Cumulatively, this implies a total transmission window of approximately 8 weeks from initial shipping disruption to operational impact at Baowu. The data point to a clear cost-push mechanism, as higher sulfur expenses feed into nickel alloy pricing and ultimately compress margins in stainless steel manufacturing. Taken together, the sustained spike in sulfur prices is set to impose significant cost and delivery risk on China Baowu Steel Group within 8 weeks. ### Could Mitigating Factors Neutralize the Risk? Skeptics might argue that China Baowu Steel Group’s diversified supplier base and strategic inventory buffers are sufficient to insulate it from upstream disruptions. However, this view underestimates the systemic nature of the current shock. While supply diversification and contractual safeguards can moderate short-term volatility, they cannot fully offset a bottleneck originating from a geographically concentrated and chemically irreplaceable input—sulfur—whose supply is simultaneously constrained across the entire nickel refining sector. ### Why Downstream Mitigation Falls Short: Evidence from Historical Precedents and Structural Dependencies A deeper analysis reveals that the sulfur-driven disruption propagates through a tightly coupled, globally integrated supply chain where alternative sourcing options are structurally limited. First, although Baowu may procure nickel alloys from multiple suppliers, nearly all major Indonesian nickel refineries—collectively responsible for over 50% of global refined nickel output—depend on Middle Eastern sulfur imports to produce sulfuric acid, the essential reagent for nickel laterite leaching. The Strait of Hormuz shipping disruptions therefore impair the entire refining ecosystem, leaving no unaffected alternative sources. Second, inventory and long-term contracts provide only temporary relief. When input costs surge beyond economic thresholds, even well-capitalized producers face operational curtailments. This was evident in December 2025, when Mosaic idled its Araxá and Paraná phosphate operations in Brazil after sulfur prices reached $540–550/tonne CFR—a level that rendered production uneconomical despite existing supply agreements. Historical patterns further corroborate this transmission mechanism. In 2025, Red Sea shipping disruptions triggered a 206% increase in global sulfur prices—from approximately $170/tonne in early 2025 to $520/tonne by mid-year—demonstrating how geopolitical logistics shocks rapidly translate into cost pressures across metallurgical value chains, irrespective of buyer-side hedging. The current escalation mirrors this dynamic: US-Iran tensions have pushed Chinese domestic sulfur prices to ¥4,650/tonne ($672/tonne), compounded by force majeure declarations such as Bahrain’s Bapco shutdown at its Sitra refinery, which supplies 210,000 tonnes annually. Tracing the risk propagation pathway confirms the inevitability of downstream impact: sulfur shortages constrain Indonesian sulfuric acid availability, reducing nickel alloy output within 1–2 weeks; as nickel alloy inventories deplete over the next 2–4 weeks, electric arc furnace operations slow; stainless steel production follows with a 1–2 week lag; and Baowu experiences cumulative cost and delivery pressure within 8 weeks. At each node, the cost signal amplifies—sulfur price hikes feed directly into nickel alloy pricing, which in turn compresses stainless steel margins—rendering conventional resilience measures insufficient against sustained, system-wide input inflation. ### Integrated Risk Assessment: High Probability, High Impact The convergence of geopolitical instability in the Strait of Hormuz and structural dependencies in the global nickel supply chain constitutes a high-probability, high-impact risk for China Baowu Steel Group. The disruption pathway is both technically precise and empirically grounded: Middle Eastern sulfur exports—indispensable for sulfuric acid production in Indonesia, the epicenter of global nickel refining—are directly impeded by recurring maritime interruptions. This creates a systemic bottleneck that cannot be bypassed through supplier diversification, as the entire refining sector shares a common upstream vulnerability. Current market dynamics reinforce this assessment. Between January 23 and April 8, 2026, while nickel prices declined from $18,115.45/tonne to $17,186.82/tonne, sulfur prices surged by 52%—from ¥4,042.73/tonne to ¥6,159.70/tonne—and nickel pig iron rose from $791.60 to $855.60 per nickel unit, signaling active cost-push transmission. Given the sequential lag structure—1–2 weeks to nickel alloy, 2–4 weeks to electric arc furnaces, and a cumulative 8-week window to Baowu’s operations—the company faces material operational and financial exposure. Inventory buffers and long-term contracts offer only transient protection against sustained input cost inflation, particularly in a market where alternative sulfur sources are constrained by global supply-demand imbalances. With sulfuric acid being chemically irreplaceable in nickel leaching and refining capacity heavily concentrated in Indonesia, Baowu’s risk exposure is both unavoidable and quantifiable. Conventional supply chain resilience strategies are therefore unlikely to fully mitigate the impending cost and delivery pressures.