A looming shortage of petroleum coke, a key input for aluminium smelters, may disrupt production outside the Gulf region as well, according to a report by JP Morgan. The investment bank highlighted that the global supply of pet coke is tightening due to reduced output from refineries and increased demand from other industries.
Impact on Aluminium Smelters
Petroleum coke is used as a carbon source in the anode production process for aluminium smelting. A shortage could lead to higher costs and potential output cuts. JP Morgan noted that while Gulf producers have access to captive supplies, smelters in other regions, particularly in Asia and Europe, are more vulnerable to supply disruptions.
Supply Chain Challenges
The report points out that the pet coke market is already under strain from refinery maintenance shutdowns and the shift towards cleaner fuels. Additionally, the growing demand from the cement and power sectors is further squeezing availability for aluminium producers. This could exacerbate the existing supply-demand imbalance.
JP Morgan estimates that if the shortage persists, aluminium production outside the Gulf could decline by up to 2-3% in the coming months. This would add to the pressure on global aluminium prices, which have already been volatile due to geopolitical tensions and energy costs.
Regional Vulnerabilities
Asian smelters, especially in China and India, are likely to be the most affected, as they rely heavily on imported pet coke. European producers may also face challenges, though some have diversified their supply sources. The report suggests that aluminium companies should secure long-term contracts or invest in alternative carbon materials to mitigate risks.
Market Outlook
JP Morgan maintains a cautious outlook on aluminium stocks, citing the pet coke shortage as a key risk factor. However, the bank also notes that higher aluminium prices could offset some of the cost pressures for producers with secured supply chains. The situation is expected to remain fluid, with refinery output and global trade policies playing crucial roles.
In conclusion, the petroleum coke shortage poses a significant threat to aluminium production outside the Gulf region. Producers and investors alike should monitor developments closely, as any further tightening could have far-reaching implications for the industry.
