CITIC SEC: Price differentiation in commodities continues in Q2 2026, remains optimistic about the performance of chemical products.

CITIC SEC released a research report stating that since March 2026, fluctuations in commodity prices have been affected by the conflict in the Middle East. Expectations for price increases in energy and chemical products are strong, while some basic metals have experienced price adjustments due to slowing global economic growth and other demand-side factors. Looking ahead to the second quarter, the duration of the Middle East conflict may become one of the important variables influencing commodity price fluctuations. If the conflict continues, the logic behind commodity prices since March is expected to further strengthen. If the conflict ends, demand-side factors for different commodities are likely to drive price changes. Overall, the bank continues to be optimistic about the performance of energy and chemical product prices in Q2; also worth watching are disruptions in the supply side, and significant demand support for lithium carbonate and electrolytic aluminum. Key points from CITIC SEC: Investment strategy: Looking ahead to Q2 2026, the Middle East conflict remains a key variable influencing the commodity market. If the conflict continues, the logic behind commodity prices since March may further strengthen. If the conflict ends in the short term, it will take time for the supply fundamentals of related products to return to the pre-conflict situation. The bank continues to be optimistic about the performance of energy and chemical products prices in Q2, especially in the middle and later parts of Q2, with gas and coal prices performing better than expected due to strong demand in East Asia; demand-supported and supply-disrupted varieties like electrolytic aluminum and lithium carbonate are expected to continue to perform well. Additionally, the long-term logic supporting gold and copper prices remains effective, with trading opportunities expected to emerge in Q2 as geopolitical conflict expectations change. Focus should be on policies against domestic market concentration and the pace of downstream demand release in industries such as silicon materials and steel. Middle East conflict has become a core variable disturbing the commodity market since March, and energy and chemical product prices may continue to benefit in Q2 Since the Middle East conflict, some supply facilities in the core energy production areas of the Middle East have been damaged, and key sea transport routes have been blocked, leading to strong expectations of energy supply contraction. Fossil energy such as oil, gas, coal, and downstream chemical products have seen a rapid price increase. If the conflict in Q2 continues, the logic behind the price increase of energy and chemical products since March may be further strengthened; if the conflict eases in the short term, it will take time for energy production capacity to recover and the supply-demand landscape of energy and chemical products based on energy security may be reshaped again. In addition, with Asia's gas and coal replenishment season gradually approaching in May and June, Q2 is expected to continue to benefit from the prices of energy and chemical products overall. Supply disruptions and demand-side support, electrolytic aluminum and lithium carbonate prices expected to remain strong in Q2 The Middle East conflict has disrupted the supply of energy, raw materials, and production facilities in three aspects, directly and indirectly affecting the supply of electrolytic aluminum in the Middle East and overseas. At the same time, high oil prices are expected to partially drive demand in the new energy field, and in the absence of a significant global economic recession, the price outlook for electrolytic aluminum in Q2 is also expected to remain positive. Currently, there is a high probability that the fundamentals of lithium will continue to improve, as high oil prices drive demand for lithium batteries and energy storage batteries, and disruptions in African lithium carbonate supply may create a supply gap in Q2, thereby maintaining strong prices for lithium carbonate. Gold prices are showing short-term fluctuations at high levels, but the long-term price logic remains unchanged Earlier this year, precious metal prices experienced a sharp correction after hitting historical highs. The bank believes that the risks in precious metal prices have been effectively released, and there is a possibility of correction in the previously pessimistic market expectations. Loose liquidity and the long-term trend of "de-dollarization" have not reversed, and interest rate expectations trading correction are expected to promote short-term gold price recovery. The bank expects the range for gold prices in Q2 2026 to be $4000-5000 per ounce. Although changes in macroeconomic expectations have put pressure on demand expectations, industrial metal prices such as copper are expected to weaken, but the bank predicts that the shift in the supply-demand landscape to seasonal scarcity in Q2 will provide a potential bullish window for copper prices, and supply declines and demand resilience are expected to be positive factors, with the possibility of copper prices rising if macro pressures are relieved. Outlook for commodity prices in Q2 2026 The core variable for Q2 prices remains the duration of the Middle East conflict. The bank expects Q2 price forecasts (average prices) based on two scenarios: short-term end of the conflict (lasting only 1-2 weeks, etc.) and the conflict continuing throughout the entire second quarter: 1) Energy and chemicals: If the conflict ends in the short term, crude oil, thermal coal, and methanol prices may reach $95 per barrel, 750 yuan per ton, and 3,000 yuan per ton respectively. If the conflict continues, the average prices may reach $110 per barrel, 850 yuan per ton, and 3,500 yuan per ton respectively; rubber prices are expected to fluctuate around 17,000-18,000 yuan per ton. 2) Non-ferrous metals: Gold prices are expected to range from $4500 to $5000 per ounce; LME copper prices in Q2 2026 are expected to range from $12,000 to $14,000 per ton; aluminum prices may range from 24,000 to 26,000 yuan per ton depending on the duration of the conflict, and lithium prices are expected to reach 170,000-200,000 yuan per ton. 3) Ferrous metals: The bank expects prices for hot-rolled coils, high and low, to be 3,150 and 3,200 yuan, and for iron ore, high and low, to be $102.5 and $110 per ton depending on the duration of the conflict. 4) Others: The bank expects the futures contract prices for polysilicon/industrial silicon in Q2 2026 to fluctuate around 50,000 yuan per ton and 8,500 yuan per ton. Risk factors: Risks of escalating global trade disputes; unexpected easing of geopolitical conflicts; demand growth below expectations due to high prices; liquidity not as loose as expected; upstream supply growth exceeding expectations; operational risks of foreign assets for companies; slower progress in new production capacity construction for companies; unexpected severity of safety and environmental protection situations.