Synthetic Graphite Prices Climb as Petroleum Coke Supply Dries Up

The synthetic graphite supply chain that underpins global electric vehicle battery production is facing mounting pressure as the closure of the Strait of Hormuz continues to restrict petroleum coke availability. Synthetic graphite, which dominates the anode material market for lithium-ion batteries, is produced from petroleum coke and needle coke, both byproducts of crude oil refining. With Middle Eastern refineries halted or running at reduced rates since the start of the Iran war, the feedstock pipeline feeding Chinese graphite producers has tightened sharply.

The Strait of Hormuz has been effectively closed since February 28, 2026, following U.S. and Israeli military operations against Iran. According to JPMorgan Commodities Research, around 20 percent of global petroleum coke supply is exposed to disruptions linked to the chokepoint. The April 2026 IEA Oil Market Report noted that Asian refineries cut crude runs by approximately 6 million barrels per day as feedstock supplies from the Gulf dried up, while Asian petrochemical producers slashed operating rates by 10 to 15 percent.

China produces over 61 percent of global battery-grade synthetic graphite, with major capacity concentrated in Shandong, Inner Mongolia and Sichuan. These producers depend heavily on petroleum coke streams from both domestic and Middle Eastern refineries. The dual squeeze of reduced Chinese refining throughput and halted Gulf exports has begun to ripple through the synthetic anode market, where prices were already volatile after a sharp surge in late 2025 driven by trade barriers and shifting tariffs.

Needle coke, the higher-grade feedstock used in premium battery anodes and graphite electrodes, faces particularly acute pressure. Roughly 73 percent of global needle coke output is concentrated in China, yet the country still relies on imported petroleum coke streams to feed its broader synthetic graphite production. With refineries opting to maximize higher-value outputs such as diesel and jet fuel during the price rally, lower-value byproducts like petroleum coke see reduced availability.

Natural graphite is also under strain. Shipping costs along alternative routes from major producing regions in Africa and Asia have risen significantly, adding upward pressure on prices that had reached multi-year lows in late 2025. The combined effect on natural and synthetic graphite is compounding cost pressures already felt by EV battery manufacturers grappling with disruptions to nickel, cobalt and sulfur supplies. Mixed nickel-cobalt hydroxide precipitate, a key cathode feedstock, has also been hit by Middle Eastern sulfur shortages.

As of late May 2026, downstream battery cell makers report extended lead times for anode active materials and growing concern over Q3 2026 production volumes. Major Western anode producers such as Novonix and POSCO Future M are seeing rising interest in their methane pyrolysis and recycled graphite output, though Western capacity remains insufficient to offset Chinese supply gaps. The U.S. Department of Commerce confirmed final antidumping duties exceeding 160 percent on Chinese anode active materials in March 2026, further complicating sourcing for U.S. battery plants.

Aluminium producers compete with battery manufacturers for the same petroleum coke supply, intensifying the squeeze. JPMorgan warned in May 2026 that the global aluminium market could face a 2 million tonne deficit in 2026 due to petcoke shortages, with smelters potentially curtailing production. This cross-sector competition is expected to keep prices elevated through the second half of 2026 unless the Strait of Hormuz reopens and refining throughput recovers.

Industry analysts caution that even a near-term resolution of the Persian Gulf conflict would not immediately restore feedstock balance. Restart timelines for damaged refineries are estimated at 12 to 18 months, and inventory rebuilding for petroleum coke could take several quarters. Battery makers are responding by accelerating diversification into low-emission synthetic graphite produced from methane pyrolysis, increasing natural graphite blending ratios, and exploring silicon-blended anode chemistries where technically feasible.