March 2026 — As Middle East conflict reignites and the Strait of Hormuz is temporarily blocked, international oil prices have staged a dramatic rollercoaster within a single week: first approaching $120/barrel, then plunging 11.9% to $83.45/barrel . This energy market turbulence has rapidly transmitted upstream into the lithium battery supply chain, where a story of cost pressures, survival, and negotiation is unfolding among anode material producers.
"The Middle East war seems far away, but every explosion burns our natural gas, raises our freight costs, and squeezes our profits. This isn't a story—it's our daily production cost sheet," Chen Shi, supply chain director at a large northern mining company, told reporters candidly .
For lithium battery anode companies, the impact of oil price volatility is multi-dimensional.
First Pressure: Direct Raw Material Cost Transmission. As core raw materials for synthetic graphite, petroleum coke and needle coke prices are highly correlated with crude oil. After the Spring Festival holiday, the raw material coke market has shown a pattern of "recovering demand, low inventory, and tight supply" . By early March, average prices for low-sulfur petroleum coke had risen 8%, with specific grades like 2#A petroleum coke increasing over 15% and high-sulfur coke surging up to 39%; oil-based needle coke green coke prices also rose by an average of 5% .
Second Pressure: Hidden Energy Cost Escalation. "International natural gas prices jumped 20%, and our roasting furnaces rely entirely on it—that's our lifeline," Chen Shi explained. He calculated that for lithium spodumene conversion, producing one tonne of lithium carbonate requires approximately 1,200 cubic meters of natural gas. For every RMB 0.5 increase in domestic industrial gas prices per cubic meter, the cost per tonne of lithium carbonate directly increases by RMB 600 .
Third Pressure: Uncontrolled Logistics Cost Surge. Freight costs for African lithium concentrate to China have soared from $35 per tonne pre-crisis to $85-90 per tonne—a nearly threefold increase—with war risk insurance adding another $20-30 per tonne. Shipping times have extended from the normal 35 days to 50-55 days . Overall, logistics costs per tonne of lithium concentrate have increased by $55-70, translating to an additional RMB 3,200-4,000 per tonne of lithium carbonate .
Facing the same cost pressures, different companies experience vastly different outcomes.
Spodumene Processors Feel the Pinch. Li Qunying, from the investor relations department of a mid-sized East China lithium salt company, stated: "We haven't felt that much pressure yet. Our natural gas is mainly under long-term contracts, and our African mines are on charter ships, locking in costs short-term. We probably won't feel real pressure until Q2."
But Liu Yang, an intermediary in African lithium ore trade, feels more direct pain: "We mainly act as agents for small African mines. With freight costs soaring like this, many orders are suspended. Clients say wait and see, afraid to commit. Cargo is stuck at ports, and we're losing money every day."
Salt Lake Producers Remain Unscathed. An executive from a Qinghai salt lake company explained that salt lake extraction primarily uses "adsorption + membrane" processes leveraging natural evaporation, with energy costs accounting for less than 10% of total costs and stable full costs of RMB 30,000-40,000/tonne. "This round of energy price increases has actually widened the cost advantage gap between salt lake and ore processing."
Anode Coating Leader Gets Unexpected Windfall. Xinde New Materials, a leading anode coating material supplier, benefits as its byproduct—carbon black raw material oil—is a downstream petrochemical commodity whose price fluctuates with the oil market. With oil prices rising sharply in 2026, the company expects to increase byproduct sales and boost profits . Kaiyuan Securities research notes that as of Q3 2025, the company's Dalian base held some byproduct inventory, and with byproduct prices recovering, both main and byproduct price increases could release profit elasticity .
With upstream costs soaring, can downstream companies absorb the burden? The answer is not uniform.
Chen Shi is currently in intensive one-on-one communication with several leading battery manufacturers, with a clear demand: a slight price increase, not to cover all the new costs, but only a portion. "Most leading battery manufacturers understand, after all, a stable supply chain is important to everyone. But understanding doesn't mean they can immediately accept the price increase; the negotiation continues."
Li Qunying's contacts with several battery manufacturers show a clear divergence in attitude: "Some are indeed difficult to negotiate with, as they have high inventory levels and not much procurement pressure. But a few are more proactive, willing to sit down and discuss long-term cooperation, even offering to share some of our shipping costs, on the condition of priority supply. This shows that downstream companies are also anxious, worried about supply chain problems."
A purchasing manager at a battery manufacturer frankly admitted: "We do have inventory buffers now, but those inventories will eventually run out. If the situation in the Middle East continues to deteriorate, we may really face supply shortages in three months. So we are observing the situation while also negotiating with upstream suppliers to lock in volume and prices."
GGII analysis suggests that if the Strait of Hormuz remains blocked for an extended period, the prices of most lithium battery materials will rise by approximately 10%, and the cost of lithium batteries is expected to increase by 8%–12%, corresponding to a price increase of approximately 0.03–0.05 yuan/Wh.
Although oil prices have fallen in the short term, the situation in the Middle East remains uncertain. The hardline stance of Iran's new leadership has led many in the industry to maintain a bullish outlook on international oil prices. Furthermore, the frequent large-scale orders for energy storage batteries since 2026 will provide a boost to demand, giving anode material manufacturers the confidence to raise prices.
For anode material companies, this cost anxiety caused by oil price fluctuations will ultimately test their supply chain management capabilities, cost control capabilities, and bargaining power. Those who can find the right balance in this game will be able to maintain their survival amidst uncertainty.