Good morning. Let's start with the latest geopolitical developments.
The US military announced it has commenced a series of forceful strikes against Iran. This action is in response to Iran's earlier attacks on three commercial vessels transiting the Strait of Hormuz.
According to the US Central Command, the Iranian attacks targeted merchant ships operated by innocent civilians in international waters, describing the behavior as "unjustified, extremely dangerous, and a clear violation of the ceasefire agreement."
A US official indicated that the strikes are targeting Iranian air defense systems, coastal surveillance systems, surface-to-air missiles, anti-ship cruise missiles, and drone launch sites.
Earlier, the United Kingdom Maritime Trade Operations office reported another tanker was attacked by a drone while passing through the Strait of Hormuz, marking the third such incident in the area within 24 hours. US sources added that Iran's Islamic Revolutionary Guard Corps attacked several merchant ships, with two being hit and sustaining significant damage.
Explosions Reported Across Southern Iran
Local Iranian media reported six explosions near a village on Qeshm Island in the early hours of the morning. Seven explosions were also reported near a village in Sirik. Reports indicate that commercial and fishing ports in Sirik were struck by shells, resulting in explosions.
Further reports from Iran state that multiple explosions were heard in the port city of Bandar Abbas, with additional blasts reported in the eastern and western areas of the port.
US Ends Iran Oil Sanctions Waiver, Oil Prices Jump
The US Treasury's Office of Foreign Assets Control announced the revocation of a general license that had authorized the sale of Iranian petroleum. Wind-down transactions are permitted until 12:00 AM Eastern Time on July 17. In response, international oil prices surged, with Brent crude and WTI crude futures briefly rising over 5%.
Iran has not yet issued a formal response. An anonymous US official stated that preliminary indications show Iran fired on three merchant ships in the Strait of Hormuz in recent days, calling the action "completely unacceptable" and warning it would bring consequences. The official also noted that, despite the escalation, US negotiators "continue to work in good faith toward a final agreement with Iran."
US Semiconductor and Memory Stocks Plunge
Overnight, US markets were also impacted by a sharp sell-off in South Korean stocks. As the technology sector attempted a rebound, news of the US-Iran conflict delivered a second blow to market sentiment.
At the close, the S&P 500 was down 0.45%, the Nasdaq Composite fell 1.16%, and the Dow Jones Industrial Average declined 0.25%.
The semiconductor sector, one of this year's top performers, was hit hard, influenced by a nearly 7% plunge in Samsung Electronics' share price. Intel dropped 9.66%, while SanDisk and Western Digital both fell more than 7%. The Philadelphia Semiconductor Index fell 4.65%, retreating nearly 16% from its late-June high.
Soda Ash and Glass Futures Hit Yearly Lows
Prices for soda ash and glass futures have been under pressure recently. On July 7, the main glass futures contract fell over 2%, and the main soda ash futures contract dropped over 3%, both hitting new lows for the year. While spot prices for both commodities also weakened, their declines were notably smaller than those in the futures market.
Analysts point to weak downstream demand as the core driver behind the continued decline in glass and soda ash futures prices. Consumption of float glass is highly correlated with the health of the real estate sector, which has been in a downturn since 2021, directly suppressing demand. Current daily production capacity for float glass remains high at 146,000 tons, while terminal demand is weak, leading to persistently high industry inventories. Pessimistic expectations are accelerating the price decline. The fall in soda ash futures is primarily due to weakening demand from the float and photovoltaic glass sectors, coupled with the continuous release of new industry capacity and a slow pace of capacity reduction, resulting in accumulating inventories.
The glass market currently maintains a state of weak supply and demand. Although some float glass production lines underwent cold repairs at the end of June, the supply reduction was limited. Current daily production capacity is down only 7% year-on-year, with industry inventories stable at a high of 3.8 million tons, up 10% year-on-year. The arrival of the southern rainy season, with persistent high temperatures and rain in central and eastern China, has halted outdoor construction and delayed window installation, leading to a significant drop in orders for deep-processing plants. Traders and processors are reluctant to build inventory, causing the sales-to-production ratio to continue falling and spot prices in central and southern China to decline accordingly.
The rainy season has amplified the pressure on glass shipments, as the hot and humid environment increases the risk of glass mildew and damage. All segments of the industrial chain are actively reducing inventory, further加重ing pressure on factory stockpiles.
Current spot glass prices have pushed most glass manufacturers into a loss-making situation. Futures prices are generally below spot prices, indicating strong cost support. The weak demand situation is difficult to reverse in the short term. Unless the government introduces policies to stabilize the real estate market, both the soda ash and glass industries face the possibility of production cuts exceeding expectations.
While short-term supply and demand are unlikely to improve significantly, the traditional peak season for completions in September and October, following the end of the rainy season in August, could lead to a concentrated release of pent-up demand, driving inventory reduction. Environmental policies in Hubei province may also push for supply contraction in the industry, presenting a potential bullish factor.
The strength of the demand recovery and the effectiveness of environmental policy implementation are seen as two key variables for the future market outlook. Overall, after significant declines, cost support for soda ash and glass prices has become prominent, increasing the risk of unilateral short positions. A cautious and observant approach is advised, focusing on tracking production line maintenance, inventory levels, and terminal completion data changes.
Comments