CITIC SECURITIES has released a research report stating that since March 2026, conflicts in the Middle East have led to a rotation in commodity price movements. Expectations for price increases in energy and chemical products are strong, while prices for some base metals have adjusted due to demand-side factors, including concerns over a global economic slowdown. Looking ahead to the second quarter, the duration of the Middle East conflict is expected to be a key variable influencing commodity price volatility. If the conflict persists, the pricing dynamics observed since March are likely to intensify. Conversely, if the conflict ends, demand-side fundamentals for different commodities are expected to dominate price changes. Overall, the firm maintains a positive outlook on energy and chemical product prices for Q2. Additionally, attention should be paid to lithium carbonate and electrolytic aluminum, which face supply disruptions and have solid demand-side support. The main views of CITIC SECURITIES are as follows:
Investment Strategy: Looking towards Q2 2026, the Middle East conflict remains a critical variable affecting the commodity markets. Should the conflict continue, the price trends seen since March may strengthen further. Even if the conflict ends shortly, restoring the supply fundamentals of related products to pre-conflict levels will take time. The firm continues to favor the price performance of energy and chemical products in Q2, particularly in the mid-to-late period of the quarter, where prices for natural gas and coal, bolstered by peak seasonal demand in East Asia, may outperform expectations. Products like electrolytic aluminum and lithium carbonate, which have demand support and face supply disruptions, are also expected to maintain strong performance. Furthermore, the long-term drivers supporting gold and copper prices remain valid, with Q2 anticipated to present trading opportunities as geopolitical risk expectations shift. For sectors like polysilicon and steel, the focus should be on the implementation of anti-internal competition policies and the pace of downstream demand release.
The Middle East conflict has been the core variable disrupting commodity markets since March, with energy and chemical product prices likely to continue benefiting in Q2. Since the onset of the conflict, damage to key energy production facilities in the Middle East and disruptions to critical maritime routes have sparked strong expectations of energy supply contraction. Supply-demand expectations for fossil fuels like oil, gas, and coal, as well as downstream chemical products, have reversed, leading to rapid price increases. If the conflict persists into Q2, the logic driving the rise in energy and chemical product prices since March could be reinforced. If the conflict eases shortly, restoring energy production capacity will require time, potentially reshaping the supply-demand landscape for energy and chemical products based on energy security concerns. Coupled with the likelihood of Asia entering the peak season for natural gas and coal inventory replenishment in May-June, energy and chemical product prices overall may continue to benefit in Q2.
With supply disruptions and demand-side support, prices for electrolytic aluminum and lithium carbonate are expected to remain strong in Q2. The Middle East conflict causes disruptions across three areas: energy supply, raw material supply, and production facilities, directly and indirectly affecting electrolytic aluminum supply both within the Middle East and overseas. Concurrently, expectations of persistently high oil prices may stimulate some demand in the new energy sector. Against a backdrop where the global macroeconomy does not experience a severe recession, electrolytic aluminum prices are also expected to perform well in Q2. The fundamentals for lithium are also likely to continue improving. On one hand, high oil prices are sustaining robust demand for power batteries and energy storage batteries. On the other hand, supply disruptions for lithium carbonate from Africa are expected to lead to a supply deficit again in Q2, supporting strong lithium carbonate prices.
Gold prices are experiencing short-term high volatility, but the medium-to-long-term price drivers remain unchanged. Earlier this year, precious metal prices experienced a sharp correction after hitting record highs. The firm believes the risks in precious metal prices have been effectively released, and the market's previously pessimistic expectations may be due for a correction. The long-term trends of accommodative liquidity and de-dollarization have not reversed. A correction in interest rate expectations could facilitate a short-term recovery in gold prices. The firm forecasts a trading range of $4,000 to $5,000 per ounce for gold in Q2 2026. Although demand expectations for industrial metals like copper have faced pressure due to changing macro expectations, leading to weaker price forecasts, the firm anticipates a shift towards seasonal supply shortages in Q2, providing a potential window for long positions in copper. Combined with factors such as unexpected supply declines and resilient demand, a removal of macro headwinds could catalyze a significant rise in copper prices.
Q2 2026 Commodity Price Outlook: The core variable for Q2 prices remains the duration of the Middle East conflict. The firm provides Q2 price forecasts (average prices) under two scenarios: 1) short-term conflict resolution (lasting only 1-2 more weeks) and 2) conflict persisting throughout the quarter: 1) Energy & Chemicals: If the conflict ends shortly, prices for crude oil, thermal coal, and methanol are forecast at $95/barrel, 750 yuan/ton, and 3,000 yuan/ton, respectively. If the conflict persists, average prices could reach $110/barrel, 850 yuan/ton, and 3,500 yuan/ton, respectively. Rubber prices are expected to be between 17,000-18,000 yuan/ton. 2) Non-Ferrous Metals: Gold is forecast between $4,500-$5,000/ounce. The LME copper price is expected to range between $12,000-$14,000/ton in Q2 2026. Aluminum prices, depending on conflict duration, are projected between 24,000-26,000 yuan/ton. Lithium prices are expected to reach 170,000-200,000 yuan/ton. 3) Ferrous Metals: Under different conflict duration assumptions, the high and low prices for hot-rolled coil are forecast at 3,150/3,200 yuan, and for iron ore at $102.5/$110 per ton. 4) Others: The main polysilicon/industrial silicon futures contracts are expected to fluctuate around 50,000 yuan/ton and 8,500 yuan/ton, respectively, in Q2 2026.
Risk Factors: Intensification of global trade disputes; Geopolitical conflicts easing more than expected; Demand growth falling short of expectations under high prices; Accommodative liquidity being less than anticipated; Upstream supply growth exceeding expectations; Operational risks associated with corporate overseas assets; Delays in the construction of new corporate capacity; Safety supervision and environmental protection pressures being more severe than expected.
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