When Supply Chains Break: Force Majeure, Hardship And The Sulfuric Acid Crisis

Executive Summary

The global sulfuric acid market is in the middle of a supply shock not seen since 2008. Two independent events—the effective closure of the Strait of Hormuz to commercial shipping since late February 2026 and China’s reported export prohibition on sulfuric acid effective May 1, 2026—have converged to remove a substantial portion of available supply at a moment when the market had no buffer. The S&P Global Platts CFR Mejillones benchmark, the standard reference for Chilean copper miners, doubled in less than seven weeks, with a 26.7% single-week spike following the China announcement. Producers and off-takers across Chile, Peru, the DRC, Zambia and Indonesia are now operating long-term supply contracts in a market where the underlying supply no longer exists at contracted volumes or prices.

Whether an affected party can suspend, renegotiate or terminate a contract depends almost entirely on the governing law and on the specific language of the force majeure, hardship and indexation provisions. In this context, English law, New York law, Chilean law, Peruvian law and the law of the United Arab Emirates (UAE), to name a few, produce materially different answers on the same facts. This alert sets out the factual background, the legal framework across the jurisdictions most directly implicated and the practical steps mining companies and their counterparties should take now.

1. Factual Background

Two Shocks, One Market

The first shock is geopolitical. Since late February 2026, escalating conflict involving Iran has effectively closed the Strait of Hormuz to commercial shipping. The Middle East accounts for approximately one-third of global sulfur production and roughly half of seaborne sulfur trade, and Qatar—one of the region’s principal processing hubs—has experienced direct production interruptions. S&P Global Platts assessed the FOB Middle East sulfur price at $695–$700/metric ton (mt) on March 19, 2026, an increase of $200/mt from pre-conflict levels. Under a prolonged closure scenario, S&P Global Energy CERA projected that one month of disruption would remove 1–1.5 million mt of sulfur from the market and three months could eliminate over 4 million mt.

The second shock is regulatory. On April 10, 2026, Bloomberg reported that China—the world’s largest sulfuric acid producer, accounting for over 40% of global output—communicated to domestic producers that it would halt sulfuric acid exports effective May 1, 2026. The measure covers acid produced as a byproduct of copper and zinc smelting, with limited exceptions for electronic-grade acid. The stated purpose is to protect China’s domestic phosphate fertilizer industry and food security. Chinese customs data show that shipments to Chile fell from 151,268 mt in March 2025 to 31,870 mt in February 2026 to zero in March 2026. The ban follows an earlier tightening: China’s National Development and Reform Commission had already imposed a quota of 700,000 mt on exports for January–April 2026, down sharply from 1.3 million mt exported in the same period of 2025. Russia has compounded the disruption by extending its own sulfur export ban through June 2026.

The Price Response and Exposure

Chile is the world’s largest importer of sulfuric acid (4 million mt annually), sourcing 37.1% from China, 24.1% from Peru and 11.1% from Japan. Approximately 20% of Chilean copper output—1.1 million mt of refined production annually—depends on acid-intensive SX-EW heap leaching. Chile’s CFR Mejillones spot prices rose from $190/mt on February 25, 2026 to $300/mt on April 8 and $380/mt on April 15: a doubling in under seven weeks. Chilean buyers covered their H1 2026 needs but left H2 substantially uncovered and must return to the market in May.

The shock extends beyond Chile: delivered prices in the DRC have reached $1,000–$1,400/mt; Zambia introduced a permanent permit-based export control system on March 27, 2026, citing “a critical market imbalance”; and Indonesia faces structural import dependency on Chinese acid and Middle Eastern sulfur feedstock. The supply gap cannot be closed quickly—Japan, South Korea and India combined could increase exports by only 0.5 million mt against China’s reduction of approximately 2.8 million mt, and new acid production capacity requires 18–24 months from permitting to ramp-up.

2. Legal Framework and Analysis

The contractual remedies available to affected parties will turn on a combination of the governing law of the underlying supply contract—which determines which legal doctrines are, in principle, available—and the specific language of the contract, which determines how the available doctrine(s) are to be applied.

Force majeure (FM) relieves a party of its contractual obligations—usually on a suspensory basis—where performance is impacted by a supervening event that meets defined causal and qualitative thresholds.

Material adverse change (MAC) provides a party with a trigger to re-negotiate or terminate its contract where a change in circumstance has had a material adverse effect on the counterparty’s business or the transaction economics.

Hardship—including imprevisión and excesiva onerosidad—allows parties to re-negotiate or adapt (and, in extremis, terminate) their contract when events that were unforeseeable at the time of contracting fundamentally disturb the contractual equilibrium.

These doctrines do not travel well across legal traditions: relief available under civil law on a given set of facts may be entirely unavailable under English law on identical ones.

A. English Law

English law has no implied doctrine of FM. Relief is entirely a matter of contract, and a party cannot invoke FM as a matter of common law. The scope of relief is defined by the four corners of the clause, which should provide for the catalogue of qualifying events, any catch-all wording, the causation standard, the notice mechanics and the consequences specified. A government export prohibition of the kind announced by China for May 1, 2026 will typically fall within standard “act of government,” “embargo” or “export restriction” wording, and a closure of the Strait of Hormuz could fall within “war,” “armed conflict” or “blockade” wording—but each is a question of construction of the specific clause. The causal threshold is demanding: the affected party must show that the event directly caused non-performance and that performance was impossible or materially hindered as a result; mere increased cost or commercial inconvenience is generally insufficient unless the clause expressly says otherwise. Tribunals will scrutinize the causal link closely and will discount alleged FM where other factors—financial stress, inadequate contingency planning, or the availability of alternative suppliers—materially contributed to the failure.

Notice and mitigation obligations are paramount. Late, incomplete or undocumented notices can, on their own, defeat otherwise meritorious FM claims. Affected parties must also evidence reasonable mitigation—alternative sourcing, rerouting, renegotiation of timelines—and contemporaneous documentation of those efforts is, in practice, indispensable.

Where the contract contains no FM clause at all, the affected party is left with the common-law doctrine of frustration, which applies only where performance has been rendered impossible or radically different from what was agreed; it imposes no duty to renegotiate and confers no power on a tribunal to modify contractual terms. Hardship, inconvenience, or even material loss are insufficient. A doubling of the underlying input price, however punishing commercially, will not frustrate an English-law supply contract. A narrow exception arises where the contract specifically requires performance from a source rendered legally unavailable by supervening illegality—for example, a contract for delivery of Chinese-origin acid following a formal Chinese export prohibition—but this does not assist a contract that merely references the Platts CFR Mejillones benchmark and is silent as to origin.

The operative question under English law—whether under an FM clause or the frustration doctrine—is change in circumstance: the supervening event which prevents contractual performance must represent a genuine departure from the status quo at contracting.

The Strait of Hormuz closure illustrates both dimensions of the analysis. On causation, for parties not sourcing from the Gulf, the causal chain to a delivery default is attenuated and will need to be reconstructed sourcing-by-sourcing. On change in circumstance, periodic escalation in the Gulf and the risk of disruption to Strait transits has been a persistent feature of the regional risk landscape for decades. Whether a sustained closure to commercial shipping represents a change in circumstance, rather than an intensification of a known risk, will turn on the contract date, the parties’ contemporaneous risk assessments, and the specificity of any “war” or “political risk” carve-outs in the relevant clause.

B. New York Law and the UCC

As under English law, force majeure is not a standalone common-law doctrine under New York law: a party has no general right to invoke FM absent an express contractual provision. Where the contract contains an FM clause, New York courts construe it narrowly. Performance is excused only where the clause specifically includes the event that prevents performance, and catch-all language (“or other similar causes beyond the parties’ reasonable control”) is read under the ejusdem generis principle as confined to events of the same nature as those enumerated. A clause that names “war,” “armed conflict,” “embargo,” “act of government,” or “export restriction” may capture the announced Chinese export prohibition and the Hormuz closure. A clause that does not list any of those categories and relies on a generic catch-all will face a meaningful construction battle.

Where the contract contains no FM clause, the affected party’s residual remedies are narrow. New York treats commercial impracticability as a form of impossibility, not a separate defense, and confines it to circumstances in which performance is rendered objectively impossible by the destruction of the subject matter or means of performance, by an act of God, or by operation of law. U.C.C. § 2-615 supplies a parallel statutory excuse for sellers of goods, but the threshold approaches near-impossibility: increased cost alone—including dramatic, rapid market movement—does not satisfy it unless the rise in cost is due to some unforeseen contingency that alters the essential nature of the performance. The case law applying that standard to commodity price shocks is unforgiving: courts have repeatedly declined to excuse performance even where price movement was severe and rapid, on the principle that a party that contracts at a fixed price assumes the risk of market change.

A government export prohibition is on a different footing. Section 2-615(a) expressly extends the excuse to compliance “in good faith with any applicable foreign or domestic governmental regulation or order, whether or not it later proves to be invalid.” Two qualifications matter. First, the regulation must apply to and constrain the seller—a Chinese export prohibition will excuse a Chinese seller’s non-delivery, but a non-Chinese seller cannot invoke § 2-615(a) on the basis of the Chinese measure simply because its own upstream supply has been disrupted. Second, the seller must allocate any remaining performance capacity fairly among its buyers under § 2-615(b) and give timely notice under § 2-615(c); failure to comply with either obligation forfeits the excuse.

Frustration of purpose is a theoretical alternative but rarely available in commercial supply contexts. New York applies it narrowly, requires that the frustrating event be unforeseeable, and treats general commercial or economic deterioration as foreseeable as a matter of law. A buyer whose downstream operations remain commercially viable, even at materially reduced margins, will not satisfy the test.

New York has no analogue to civil-law hardship or excessive-onerousness doctrines. Express FM, change-in-law, price-review and indexation provisions will do almost all of the work in New York-law supply contracts, and § 2-615 should be treated as a residual safety net rather than a primary remedy — one that the parties may, and routinely do, contract around entirely.

C. Chilean Law

Article 45 of the Chilean Civil Code defines caso fortuito (or fuerza mayor) as an unforeseen event impossible to resist and includes within its examples actos de autoridad ejercidos por un funcionario público. A formal Chinese export prohibition published by the Ministry of Commerce or General Administration of Customs would likely be analyzed as an acto de autoridad for these purposes.

The more significant gap in Chilean law is the absence of a codified imprevisión (hardship) doctrine. Unlike other civil-law systems, Chile has not enacted a general statutory mechanism allowing a party to seek renegotiation, adaptation or termination on the ground that performance has become excessively onerous. Some arbitral tribunals seated in Chile have applied hardship-style relief by reference to the good-faith principle in Article 1546 of the Civil Code, though the case law is uneven and local counsel verification is required before relying on this route.

D. Peruvian Law

Peru offers a favorable framework. Article 1315 of the Civil Code defines caso fortuito and fuerza mayor in terms substantially equivalent to the Chilean position, and a Chinese export prohibition or a Hormuz closure could qualify as such. Further, Article 1440 codifies excesiva onerosidad de la prestación: where, by reason of extraordinary and unforeseeable events, performance of a continuing or deferred contract becomes excessively onerous, the affected party may apply to the judge or tribunal for an equitable adjustment of the consideration and, if adjustment is not possible, for termination. The threshold is not destruction of commercial purpose but a fundamental disturbance of the contractual equilibrium—a meaningfully lower bar than English-law frustration or U.C.C. impracticability. Given that Peru is Chile’s second-largest sulfuric acid supplier (24.1% of Chilean imports), the Article 1440 route is directly in play for a substantial subset of contracts in the affected portfolio.

E. UAE Law

The UAE is a significant node in the global sulfur and sulfuric acid supply chain, and a number of the trading and offtake contracts affected by the current disruption will be governed by UAE law or performed through UAE-based counterparties. The legal framework is more complex than in the other jurisdictions, because the applicable regime depends on whether the contract is governed by onshore UAE law or by the law of one of the common law free zones.

Under onshore UAE law, three concepts are directly relevant. First, FM is codified in Article 273 of the Civil Transactions Law: where performance becomes impossible—not merely more costly or onerous—by reason of an exceptional, unforeseeable event beyond the parties’ control, the obligation is extinguished and the contract automatically rescinded. Partial and temporary impossibility produces proportionate relief rather than full termination. Second, hardship is codified in Article 249: where performance remains possible but has become oppressive due to exceptional circumstances of a general nature, the court has discretion to adjust obligations to a reasonable level. The “general nature” qualifier is directly material here: UAE courts have read it to exclude purely commercial or party-specific shocks, and the announced Chinese export prohibition and the Hormuz closure are both candidates for that analysis. Third, Articles 246 and 106 impose good-faith and abuse-of-rights standards that will inform a tribunal’s assessment of how each party conducted itself in invoking or resisting relief.

The position differs in the free zones. The Abu Dhabi Global Market mirrors the English law position: there is no statutory FM or hardship regime, and absent an express contractual clause the only recourse is the common law doctrine of frustration. The Dubai International Financial Centre has a codified FM regime under the DIFC Contract Law: non-performance is excused for the duration of the impediment where the impediment is beyond the party’s control, not reasonably foreseeable at contracting, and unavoidable. Contrary to onshore Article 273, the contract survives and termination rights are preserved. MAC is not a statutory concept under any of these regimes; it is purely contractual and will be construed on its terms.

Parties with UAE-nexus contracts should map both governing law and seat now, as the new Civil Transactions Law (Federal Decree-Law No. 25 of 2025) enters into force on June 1, 2026, replacing the existing law in its entirety. The FM and hardship regimes are broadly preserved—Articles 273 and 249 of the existing law are replaced by Articles 236 and 224 of the new law respectively—but the hardship regime is meaningfully amended: new Article 224 expressly permits the court to order rescission of the contract, in addition to the existing power to reduce the onerous obligation. The new Civil Transactions Law applies to contracts concluded on or after June 1, 2026; contracts concluded before that date remain governed by the existing law. Parties negotiating or renewing supply contracts in the coming weeks should therefore take the amended regime into account from the outset.

F. Host-state Regulatory Measures

The China ban and Hormuz closure are not the only FM triggers in play. Host-state regulatory responses to the disruption are themselves generating independent qualifying events under supply contracts. For example, on March 27, 2026, Zambia’s Ministry of Commerce, Trade and Industry introduced a permit-based export control system for sulfuric acid by Statutory Instrument, citing “a critical market imbalance” in domestic availability. The measure follows a temporary export ban imposed in September 2025 following a domestic shortage.

For any party with delivery obligations across the Zambia/DRC corridor, the Zambian Statutory Instrument can be a live FM event under the downstream supply contract. Whether it qualifies as such will depend on the governing law of that contract.

G. Price Adjustment and Indexation Clauses

Most long-term sulfuric acid supply contracts reference a published benchmark and contain an indexation or periodic-review mechanism. Where the benchmark itself moves outside its historically contemplated range, two issues arise. First, the indexation mechanism will generally be construed on its terms: tribunals applying common law focus on the natural and ordinary meaning of the text and are reluctant to imply caps, collars or equilibrium-restoring obligations that the parties did not agree. Second, the existence of a price-adjustment mechanism will frequently be invoked by the counterparty as evidence that the parties allocated price-movement risk through the index—and therefore as a bar to a parallel FM or hardship argument premised on the same price movement. That argument is strongest under English and New York law, where express risk allocation is generally dispositive, and weaker under civil law systems.

H. Interaction Between FM and MAC Clauses

Where a supply contract contains both an FM clause and a MAC clause, the two can be invoked in parallel, and the choice between them—or the decision to plead both—turns on the specific language of the provisions in question.

FM clauses typically excuse non-performance where a triggering event is beyond the affected party’s control and could not be avoided or overcome by reasonable steps. The analysis is event-led. MAC clauses are typically drafted to capture material adverse changes generally, without enumerating qualifying events: the analysis is impact-led. Where the triggering event does not fall squarely within the FM clause’s enumerated categories, MAC can offer greater flexibility—though the MAC threshold is itself demanding and is clause-specific.

Modern MAC clauses typically carve out market-wide and industry-wide events, subject to a disproportionate-effect proviso—i.e., a disproportionate effect on a party relative to other participants in the same industry. A supply shock affecting every producer dependent on imported sulfuric acid will face significant headwinds under that standard even where it comfortably satisfies an FM clause, unless the affected counterparty can show disproportionate impact relative to its peers.

Parties should develop a single coherent factual narrative before either claim is asserted, recognizing that the choice of which to lead with is a strategic decision with consequences for the other.

I. Evidentiary Considerations

A common thread runs across the FM, MAC and changed-circumstances analyses: success or failure typically turns on the strength of the contemporaneous evidentiary record. Tribunals expect to see contemporaneous documentation of the triggering event (board minutes, internal reports, government notices, supplier correspondence, customs data, trade-press reporting and operational logs); a step-by-step reconstruction of the causal chain from the event to the affected party’s non-performance, including, where relevant, the unavailability of alternative sourcing or routing; documented mitigation efforts, including the steps considered, taken and rejected and the reasons for each; and, in MAC and hardship cases, expert evidence on materiality, durational significance and market conditions. Reconstructed records prepared after a dispute has crystallized are routinely discounted. Parties with material exposure should treat evidence preservation as a present obligation, not a litigation step, and should ensure that document retention, internal reporting and external correspondence are aligned with the doctrinal requirements of the governing law.

3. Key Risks and Practical Implications

Several risks should be on the immediate agenda of any party with material exposure to the affected supply chains.

• Notice and mitigation risk. The single most common reason that meritorious FM claims fail is procedural.
• Evidencing a change in circumstance. The operative question under English and New York law is whether the supervening event represents a genuine change from the contractual baseline at signing. Parties should assemble contemporaneous risk assessments, board materials, due-diligence files and internal credit and supply-chain analyses that document the position as it stood at contracting and be prepared to identify what has changed and when.
• Forum and governing-law mismatch risk. A single mining operator may hold supply contracts governed variously by common and civil laws, with inconsistent FM, hardship and indexation provisions. The portfolio-level position is rarely uniform, and a defensible negotiating posture with one counterparty may be untenable with another.
• Downstream contagion. Operators unable to secure acid at viable prices may face their own performance issues under offtake, concentrate sales and project finance documentation, with potential MAC, default and covenant implications further down the chain. The MAC analysis is not uniform across documentation: in M&A and commercial contracts, MAC clauses typically operate as a termination or walk-away trigger, while in credit and project finance documentation they typically operate as a drawstop, default or acceleration trigger and are construed more strictly against the party invoking them.

4. Recommended Next Steps

Affected parties should treat the next 30 days as the critical window, taking the following steps:

• Audit the contract portfolio by governing law. Map each affected supply contract to its governing law and identify the FM clause, the indexation mechanism, any price-review or hardship provision, and any “change in law,” embargo or export-restriction carve-outs. Flag contracts entered or renewed after January 2026 for separate change-in-circumstance review.
• Issue notices on a strictly compliant basis. Where a party intends to rely on FM or any contractual relief mechanism, notice should be issued on the shortest applicable timetable and in the form the contract requires.
• Preserve the evidentiary record now. Collect contemporaneous documentation of the triggering events, the causal chain to non-performance, alternative-sourcing inquiries, rerouting attempts and renegotiation correspondence.
• Treat indexation and FM/hardship as a single integrated analysis. The risk-allocation effect of any price-adjustment clause will be the counterparty’s first line of defense and should be addressed head-on in any notice or pleading.
• Engage upstream and downstream counterparties early. Negotiated solutions—temporary volume reductions, price collars, deferred deliveries—are generally preferable to a contested termination, particularly where the supply gap is expected to persist through year-end and counterparties remain mutually dependent in the medium term.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.