Petroleum coke supply cut: the next trigger for a surge in aluminum prices?

The ongoing Persian Gulf conflict continues to disrupt the global commodities market, and the aluminum industry is facing a supply risk that has been severely underestimated—petroleum coke.

According to Wind Trading Desk, JPMorgan’s latest research report warns that about 20% of the global supply of this key raw material for aluminum smelting is directly affected by the blockade of the Strait of Hormuz. If shortages worsen, it will pose additional shock to aluminum smelting capacities outside the Gulf region, further tightening the already scarce global aluminum market.

JPMorgan’s commodities research team had previously forecast that the global aluminum market will face a supply gap of about 2 million tons in 2026. The bank’s report released on May 5 points out that petroleum coke prices have only risen by about 21% so far, far below the increases of over 50% for Brent crude oil and over 80% for jet fuel, indicating the market has not fully priced in this risk. If petroleum coke shortages worsen further, aluminum prices will face a new round of upward pressure.

Based on this assessment, JPMorgan maintains an overweight rating for Norsk Hydro, Aluminum Corporation of China, China Hongqiao, Press Metal, Vedanta, and Hindalco, considering these companies will benefit from the positive leverage effect of rising aluminum prices on the London Metal Exchange.

Petroleum Coke: The Indispensable Invisible Raw Material for Aluminum Smelting

Petroleum coke is a core raw material in the aluminum smelting process, yet it has long remained outside mainstream market attention. In the Hall–Héroult electrolytic smelting process, carbon anodes are made by mixing calcined petroleum coke (CPC) and coal tar pitch. Once immersed in the electrolytic cell, they are continuously consumed in the smelting process and need constant replenishment. Producing one ton of aluminum consumes about 0.4 to 0.5 tons of carbon anode materials.

From a market structure perspective, about 80% of global green petroleum coke is fuel-grade, mainly used in the cement industry; about 20% is calcined-grade, which is required for aluminum and steel production. Although the aluminum and metals industries account for only about 8% of total global demand for green petroleum coke, in the calcined petroleum coke segment, the aluminum industry accounts for around 40%, making it the largest single consumer group.

Furthermore, the petroleum coke market is relatively small, opaque, and insufficiently financialized, with consumers having almost no effective price hedging tools. This makes the market especially vulnerable to supply shocks.

Hormuz Blockade: Multiple Transmission Channels for the Supply Chain

The ongoing blockade of the Strait of Hormuz is transmitting its effects to the global aluminum supply chain through multiple pathways. The Middle East region accounts for about 40% of global crude oil supply, and the Persian Gulf about 20%. Crude oil shortages have already caused refinery capacity reductions in several regions, which in turn affects the supply of petroleum coke, a byproduct of oil refining.

It is estimated that about 20% of global petroleum coke supply is directly affected by the blockade of the Strait of Hormuz. In terms of regional distribution, the Asia-Pacific region accounts for about 35% of global calcined petroleum coke supply, but relies heavily on crude oil imports from the Gulf, so its actual impact may be even greater.

Meanwhile, the Gulf region itself has about 7 million tons per year of aluminum smelting capacity, accounting for about 9% of global total capacity. Two smelting plants have already been attacked, resulting in about 3% of global aluminum production disruption. Additionally, the region normally imports about 8 million tons of alumina per year—a key raw material for aluminum smelting—through the Strait of Hormuz, but the blockade has thrown this supply into jeopardy.

If the conflict is resolved, refinery capacity may recover faster than aluminum smelting capacity, as it may take 12 to 18 months to repair damaged smelters. By then, petroleum coke supply may be restored while aluminum capacity remains offline, making the market dynamics even more complicated.

Producers: No Shortage Yet, But Cost Pressures Are Emerging

The report, through first-quarter 2026 earnings season and industry surveys, summarizes the latest statements by major aluminum producers on petroleum coke supply. Overall, it presents a mixed signal of “no shortage yet, but rising costs”.

Alcoa says the Gulf region is usually a net importer of petroleum coke, importing about 1 million tons of calcined coke per year, about one third of its demand, and local calcining plants are running close to full capacity. The company holds 1 to 2 months of inventory and uses a quarterly pricing mechanism. Alcoa disclosed that every $10/ton change in petroleum coke prices results in an annualized cost sensitivity of about $8 million. Alcoa warned in its first-quarter earnings call that disruptions near the Strait of Hormuz are driving up costs and uncertainties for imported anodes, calcined coke, and coal tar pitch. The price increase for green petroleum coke is expected to gradually be passed on after the second quarter.

Norsk Hydro says most of its petroleum coke procurement contracts are for 1 to 2 years, with quarterly price resets. Its smelters currently face no shortage of petroleum coke or carbon anodes. Press Metal purchases prebaked anodes from suppliers in Shandong and maintains about 1.5 to 2 months of inventory, also reporting no supply issues. Chinese aluminum producers usually procure prebaked anodes directly, with limited visibility into the upstream petroleum coke market. Hongqiao holds about one month of prebaked anode inventory sourced from several domestic suppliers, with stable supply and moderate price increases that can be easily absorbed at current aluminum pricing and profit levels.

In terms of cost structure, carbon-related costs (including petroleum coke) account for 15% to 20% of the C1 cash costs of aluminum smelting. Of this, Norsk Hydro’s carbon cost ratio is about 18%, and Alcoa’s about 16%.

Alternative Technologies: Long-Term Direction, No Immediate Solution

Reducing or even eliminating reliance on petroleum coke is a core issue in the aluminum industry’s decarbonization pathway. However, according to JPMorgan, the sector will remain heavily reliant on petroleum coke in the near to medium term.

In the area of inert anode technology, ELYSIS, a joint venture between Rio Tinto and Alcoa, achieved its first commercial-scale inert anode electrolytic cell in November 2025 at the Alma smelter in Quebec. This technology emits oxygen instead of carbon dioxide and does not consume petroleum coke. Rusal also announced in August 2025 that it had used inert anode technology to achieve stable production of P1020 standard aluminum ingots for the first time.

Norsk Hydro has chosen a different path. The company takes a relatively cautious approach to inert anode technology, instead exploring carbon capture and storage (CCS) as a transition solution for existing smelters. It has partnered with MIT spin-off Verdox to pilot electrochemical carbon capture at the Sunndal smelter, targeting the first commercial project by 2029. Its long-term technology roadmap, HalZero, aims to pre-convert alumina to aluminum chloride for electrolysis, thus retaining chlorine and carbon in a closed loop and only emitting oxygen.

Norsk Hydro confirmed at its first-quarter 2026 earnings release that the HalZero test facility is operational, but emphasized the technology is still in early-stage development and is more suitable for new smelter projects. The company is also exploring replacing petroleum coke and coal tar pitch with biomass materials, but these efforts are likewise still at the R&D stage.

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