According to the London Times, the price of sulfur has risen from $50 to $500 a ton in under a year. More from this report:

“Shell is one of the most-efficient producers of sulphur,” Barry Clarke, a sulphur market analyst for Pentasul, said. Shell produces about 3.5 million tonnes of sulphur, much of it from its Canadian oil sands business, and its cost, Mr Clarke reckons, is merely the rail freight cost of getting the sulphur to a port, about $25 a tonne.

Mr Clarke agrees that sulphur, once a burden, could earn the oil industry billions this year. “It’s going to show up in the earnings of companies,” he said. The price is expected to rise further with spot cargoes changing hands for as much as $700 a tonne. Demand for metals is also keeping sulphur bubbling, as sulphuric acid is used in the mining industry to leech metal from ore.

“The biofuel boom has kicked off a big increase in the demand for sulfuric acid,” says Chris Mayer in The Daily Reckoning.

“In fact, some 60% of the sulfuric acid ends up in agriculture. The surge in ethanol production is a double whammy on sulfuric acid. First, all that corn needs fertilizers. And second, the ethanol facilities themselves also use sulfuric acid in their own processing. A typical ethanol facility requires 2,000-4,000 tons of sulfuric acid per year.

“Then there is that great demand pull from China and India. Traditionally, these two countries produced what they needed. But now their own rapid industrialization has turned the tables. They’ve switched from being exporters to importers of sulfuric acid.”

Read on to find the only “pure play” on sulfuric acid spot prices — a little-known company that’s one of the world’s largest suppliers of sulfuric acid.

Then last week, I came across a piece about how the cost of treating water is “going through the roof.” The main culprit is, once again, the rising price of sulfuric acid.

As one water utility rep said:

As sulfuric acid prices increase, so do the products that contain this ingredient. The U.S. has also seen a shortage in supply of sulfuric acid. The U.S. has imported the majority of sulfuric acid from China in the past, but recently, China has slowed the trade of sulfuric acid to the U.S. because its own demand is greater than what China can produce for both the U.S. and itself.

In short, demand is swamping supply. Sulfuric acid prices in March hit a record high of $329 per ton, according to Purchasingdata.com, after trading at $90 per ton as recently as October.

Sulfuric acid shortages? Hmmm… Well, time to take a look at this, I think…

“Sulfuric acid is one of those unheralded lubricants that keep the gears of the industrial economy spinning,” says Chemical and Engineering News. “Although less in the limelight than petrochemicals such as ethylene or polyethylene, it is, in fact, the largest-volume chemical in the world.”

We use sulfuric acid in mining to extract copper, nickel, and uranium. We use it in steel production and in making fertilizers. We use it to refine oil and to treat wastewater. It goes into the plastics we make, and a bunch of other things.

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The biofuel boom has kicked off a big increase in the demand for sulfuric acid. In fact, some 60% of the sulfuric acid ends up in agriculture. The surge in ethanol production is a double whammy on sulfuric acid. First, all that corn needs fertilizers. And second, the ethanol facilities themselves also use sulfuric acid in their own processing. A typical ethanol facility requires 2,000-4,000 tons of sulfuric acid per year.

Then there is that great demand pull from China and India. Traditionally, these two countries produced what they needed. But now their own rapid industrialization has turned the tables. They’ve switched from being exporters to importers of sulfuric acid.

The boom in metals such as copper and nickel also drives the demand for sulfuric acid. Smelting operations typically throw off sulfuric acid as a byproduct. But even here, metals companies need more than they can produce.

Supply is also tight. As with many commodities, there was a long period when sulfuric acid prices went nowhere. This led to a decrease in production facilities. I found one example of a closure as late as November 2006, when GenTek shut down a sulfuric acid facility due to “adverse market conditions.”

There also seems to be little new capacity on tap. Industrial Info Resources, in Sugar Land, Texas, tracks this sort of thing. According to IIR, of the $89 million invested in sulfuric projects in the U.S. in 2007, most of the funds went toward planned maintenance, rather than expanded capacity.

It turns out that not only is supply tight, but there are all kinds of transportation bottlenecks in delivery – such as a shortage of rail cars. Key Compton, president of a sulfuric acid producer in Texas, said toward the end of last year that customers soon “may be paying prices for sulfuric acid that they’ve never seen before.”

So how can you play it?

Well, there are a number of producers of sulfuric acid. Most are big chemical companies that you wouldn’t own because you want exposure to sulfuric acid. Owning them is like buying Home Depot because you think it sells a great lawn mower.

There are a few tiny players here that I’m currently researching for my readers. But since this sector is red-hot at the moment and appealing on many levels, I’m sharing the insights I’ve gleaned so far. I would advise all investors to do the same.

The skyrocketing price of sulfuric acid shows how interrelated the world’s commodity markets and economies have become. And these interrelationships can produce investment opportunities at light speed. I’ve written about my favorite opportunities in these pages before. (You can read my energy idea here and my metals idea here.)

Agriculture, energy, metals… they’re all threads in one big story – one big, rapidly evolving story.

Good investing,

Chris Mayer

Editor’s note: Chris Mayer is the editor of Capital & Crisis, a monthly advisory we consider required reading at DailyWealth. With Chris’ research, you can always count on contrarian investment ideas you won’t read about anywhere else. Click here to learn more about Capital & Crisis and how Chris has compiled one of the most amazing track records in the business. We think a subscription is one of the best investment deals available today.

Source: You’ve Never, Ever Considered This Agriculture Investment…