CaiXin Futures: US and Iran signal willingness to negotiate, increasing volatility in the energy and chemical sector

⑴ In terms of crude oil, recently the US and Iran have signaled willingness to negotiate, with the US delaying strikes against Iran, causing oil prices to fall from their highs. Increased marginal flow around the Strait of Hormuz may ease tight supply concerns, leading to higher volatility expectations in the energy and chemical sector. In the short term, most oil and chemical products are viewed cautiously.⑵ Regarding fuel oil, the range of attacks on Middle Eastern infrastructure and oil facilities has expanded, and oil-producing countries in the region have cut production, while domestic imports of high-sulfur fuel oil remain highly dependent; Iranian high-sulfur fuel oil accounts for 20% of domestic imports, and the supply deficit is difficult to recover in the short term. However, as US-Iran talks continue and geopolitical tensions ease, prices are mainly correcting from high levels.⑶ For glass, last week one production line each in South China and Southwest China went offline, and the daily melting volume at the start of this week dropped to 144,900 tons. The North China market remains basically stable, manufacturers’ shipments vary, the Shahe market is flexible in transactions, and prices for some specifications have shifted lower. Supplies stay at low levels and rising energy costs provide certain support for prices, but demand forecasts are not strong. Overall, prices are expected to fluctuate widely.⑷ For soda ash, maintenance increased this week, with today’s operating rate down to 81.54% and no new maintenance scheduled. Inventory as measured on Monday fell by 42,200 tons compared to last Thursday, down by 2.28%. Downstream demand is steady and replenishing as needed. The current basis futures offers are as follows: Hebei warehouse pick-up 05 minus 30 to 50, Shahe 05 flat to 05 plus 10, Hubei warehouse pick-up 05 flat, Inner Mongolia plant pick-up 05 minus 300 to 350. In general, rising energy costs and increased short-term maintenance have caused upstream destocking, thereby supporting prices, but medium-term supply remains loose and prices are expected to fluctuate.⑸ For caustic soda, today liquid caustic soda prices in Shandong rose while liquid chlorine prices remained stable, and chlor-alkali profit stands at 688 yuan/ton. Supported by sustained growth in exports, the price focus of liquid caustic soda in Shandong and in various regions nationwide has moved upward. Tight supply of raw materials has caused some chlor-alkali enterprises to have already or plan to reduce production loads, along with overseas plant shutdowns, sustaining positive sentiment. Last week, nationwide sample inventory of liquid caustic soda was 500,700 tons, a week-on-week decrease of 6.28%, alleviating inventory pressure. However, fluctuating sentiment regarding the Iranian situation has caused significant basis premium, and caustic soda is expected to be more volatile in trading, with opportunities to reduce long positions at highs.⑹ Regarding methanol, today Taicang spot price is 3,045, down 165; Inner Mongolia North Line price is 2,362.5, down 67.5. US and Israeli attacks on Iran’s largest natural gas and methanol production facilities have resulted in shutdowns, and geopolitics have reduced methanol supply at the source. Delayed and decreased imports into the domestic market will continue to extend. This week, sample arrivals of methanol at Chinese ports are 99,300 tons, and sample inventory at ports is 1,155,500 tons, down 106,200 tons from last period. Nevertheless, due to repeated geopolitical sentiment and US-Iran negotiation signals, volatility is expected to increase, and long positions may take profit on rallies.