The material supply chains behind the electric data center

The original argument

The CGEP article challenges a simple binary: China imports fossil fuels but dominates clean technology, so a fossil-energy crisis must strengthen its position. A disruption can raise demand for Chinese solar panels, batteries and electric vehicles while simultaneously stressing the upstream inputs used to make them. The vulnerabilities are often hidden in petrochemicals and mineral-processing reagents rather than finished products.

Before the Hormuz crisis, the Middle East supplied about 40 percent of China’s naphtha imports and 45 percent of its liquefied petroleum gas imports, much of it moving through the strait. In the source account, imports of both from the region fell by more than 70 percent year on year in April 2026. Those inputs support plastics, olefins and components used in clean-technology manufacturing.

Chinese producers cut some petrochemical output and sought substitutes. US ethane imports rose 72 percent month on month in April, but ethane cannot reproduce the entire range of olefins and co-products derived from naphtha and LPG. Polymer prices reached approximately four-year highs and remained volatile into September. Methanol presents another channel: it feeds electrolyte solvents and plastics, roughly one-third of seaborne trade passed through Hormuz before the crisis, and about 70 percent of China’s 2025 methanol imports came from the Middle East.

Sulfur: a less visible bottleneck

Sulfur is used to make sulfuric acid, a major input into some battery-mineral processing routes. The article’s account indicates that roughly half of seaborne sulfur passed through Hormuz before the crisis; associated shipping volumes fell around 98 percent in April, while Asian delivered prices rose about 50 percent.

China is a large sulfuric-acid producer but imports more than half of the sulfur it needs, with around 56 percent of its 2025 sulfur imports originating in the Middle East. Exposure also travels through other countries. Indonesia’s high-pressure acid-leach nickel processing relies heavily on sulfuric acid, and around 75 percent of Indonesian sulfur imports came from the Middle East. Shortages forced some projects to reduce output and raised nickel-processing costs by roughly one-third in the source account. Those effects could then pass into Chinese cathode materials, batteries and EVs.

Lithium conversion is another route. Some hard-rock processing operations saw the share of production costs attributable to sulfuric acid increase to more than three times its earlier level. This does not imply that all batteries have the same exposure: chemistry, processing route, inventories and supplier arrangements differ.

Why manufacturing has remained resilient

The article identifies three buffers. First, substitution: coal chemistry can replace some oil-derived inputs, and integrated refining and chemical production can improve output flexibility. Second, domestic materials: China produced around 78 percent of global natural graphite and 60 percent of primary aluminum in 2024. Much of its bauxite came from Guinea, outside the Hormuz route. Third, electricity: coal provides roughly half of Chinese generation, limiting the direct transmission of international gas prices into industrial electricity costs.

The source account also notes that more than 60 percent of the electricity used in global solar manufacturing comes from coal, substantially reflecting the concentration of production in China. This can support production during a gas shock while creating carbon-footprint exposure.

Each buffer has a cost. China still imports around 70 percent of its crude oil, with about half coming from the Middle East before the crisis. Coal chemistry cannot eliminate that dependence. Rapid expansion can generate petrochemical overcapacity and higher emissions. Coal-powered manufacturing can also encounter carbon standards, green-procurement conditions and border measures. Resilience today may therefore create commercial and environmental vulnerabilities tomorrow.

The data center connection

A data center is not simply an electricity-consuming asset. It is a material system of batteries, uninterruptible power supplies, cooling equipment, plastics, cables, transformers, copper, aluminum and semiconductor equipment. Supply disruption can reach the sector through construction costs, equipment availability and the cost of its own energy systems.

Battery storage is particularly relevant. Some operators are considering or deploying batteries to complement diesel backup and support peak management, demand response or grid services. If the cost or availability of sulfur, lithium-processing inputs, nickel or other chemicals changes, the economics of a proposed battery configuration may also change. A project planned around grid electricity, renewable procurement and storage might place greater weight on gas or diesel backup. That is a possible transmission mechanism, not an inevitable response to every material-price increase.

China’s manufacturing position may create equipment-side advantages for AI infrastructure in addition to its electricity-side resources. Yet those advantages remain partly dependent on imported feedstocks and maritime logistics. The comparison must therefore separate control over finished equipment from control over every upstream input.

Three layers of resilience

The analysis suggests three linked questions: can electricity reach the facility; can the necessary equipment be delivered and replaced; and can manufacturers obtain the raw materials and chemicals that make the equipment possible?

Power resilience, equipment-supply resilience and raw-material resilience operate on different timelines and through different contracts. Studying all three connects data center development with industrial policy, trade exposure and national AI capacity. It also makes technology choice an institutional question: supply-chain shocks can influence the design of backup and storage systems, which in turn changes emissions, permitting needs and risk allocation.