Carbon Industry Undergoes Structural Transformation: Tightening Upstream Raw Material Supply, Dual Growth From New Energy And Metallurgy Downstream

In Q3 of 2026, linkage across China's carbon industrial chain keeps strengthening. Shifting supply conditions at the raw material end are directly passed on to midstream carbon product manufacturers, while recovering demand from multiple downstream sectors unlocks long-term growth potential.

Petroleum coke, produced through delayed coking units in refineries, acts as the core upstream feedstock for carbon industry, and serves as the basic raw material to produce prebaked anodes and graphite electrodes. Domestic petroleum coke capacity is mainly distributed among independent refineries in Shandong and large integrated refineries. With the transformation and upgrading of China's refining sector, new delayed coking units are no longer constructed on a large scale. New processes such as residue hydrocracking gradually replace traditional coking routes. Total domestic petroleum coke output sees a slow decline, accompanied by obvious product structure changes. The share of low-sulfur, high-quality petroleum coke rises while supply of medium and high-sulfur fuel coke shrinks. Coupled with periodic maintenance of overseas refineries and volatility in international crude oil trade, arrivals of imported petroleum coke drop in phases. Carbon manufacturers face mounting pressure on raw material procurement, port inventories remain low, and spot prices of low-sulfur petroleum coke have kept climbing since Q2.

As premium carbon feedstock, needle coke can be coal-based or oil-based, and is essential raw material for ultra-high power graphite electrodes and high-grade lithium battery anode materials. This year, favorable policies for electric arc furnace steelmaking together with capacity expansion of energy storage batteries have quickly lifted demand for needle coke. Spot supply stays tight. Many needle coke producers run at full capacity with extended order backlogs. High-grade needle coke used to rely heavily on imports for a long time. After years of technical research, domestic enterprises have broken through manufacturing bottlenecks. Domestic needle coke has kept improving in purity and crystal structure indicators, gradually entering the supply chain of major domestic carbon manufacturers. Some products are exported, steadily cutting external reliance on high-end raw materials.

At the midstream carbon product segment, manufacturers carry out multiple processes including crushing, batching, kneading, forming, baking and graphitization on raw materials such as petroleum coke, needle coke and pitch. The whole process is energy-intensive with long production chains. Graphitization, the core procedure, also accounts for most carbon emissions of the industry. Environmental and energy consumption restrictions continue to constrain new capacity. Small and backward capacities keep exiting, lifting industrial concentration. Many midstream carbon firms extend upstream, signing long-term strategic cooperation agreements with refineries to lock stable petroleum coke supply, building a complete supply chain from refinery raw materials to finished carbon products and mitigating operational risks caused by raw material price swings.

Downstream application markets act as the core driver reshaping the carbon industry. The largest traditional downstream sector is aluminum electrolysis. Prebaked anodes, essential consumables for electrolytic cells, maintain stable demand. As domestic aluminum electrolysis capacity shifts to northwest regions with lower energy costs, prebaked anode production bases relocate accordingly. The steel sector is another major consumer. China promotes capacity replacement policies to convert blast furnaces into electric arc furnaces, raising the proportion of steelmaking via electric arc furnaces and bringing structural growth in demand for large-size ultra-high power graphite electrodes. Large-diameter electrodes have high technical barriers, and only a small number of domestic manufacturers can achieve stable mass production.

The new energy track brings brand-new incremental demand. Artificial graphite anodes dominate lithium battery anode materials, and rapid expansion of energy storage continuously drives demand for carbon raw materials for anodes. High-value special carbon materials, such as carbon-carbon composites for photovoltaic silicon thermal fields, nuclear graphite components for high-temperature gas-cooled nuclear reactors and isostatic graphite for semiconductors, are key targets of domestic technical research.

Industry participants generally believe the long-term positive fundamentals of carbon industry remain solid, yet multiple challenges persist in the short run. Volatile upstream raw material prices, high energy costs for graphitization and long certification cycles for high-end products all restrict corporate profitability. Meanwhile, under the dual-carbon goals, the industry faces mounting pressure for low-carbon transformation. Energy-saving baking, waste heat recovery and low-carbon graphitization upgrades become mandatory for carbon plants.

The future development path of the industrial chain is clear: upstream sectors need to guarantee stable supply of high-quality carbon raw materials; midstream players shall continuously improve product consistency and cut energy consumption; downstream enterprises keep exploring emerging high-end scenarios including semiconductors, aerospace and hydrogen energy. Domestic carbon materials will continue import substitution, and China's carbon industry is steadily transforming from a large-scale producer into a strong advanced material nation.