Zhongjin: Geopolitical Ripples Will Shape the Fundamental Trend of Commodities in the Second Half of the Year, with the Lingering Risks of Global Climate Disturbances Not to be Overlooked.

Zhongjin releases a research report stating that in the first half of 2026, the commodity market has emerged from weak expectations and low volatility, regaining volatility and attention. Looking ahead to the second half of the global commodity market in 2026, despite signs of marginal easing of tensions between the US and Iran, supply losses have already formed, derivative impacts are unfolding, energy inflation is difficult to avoid, and demand response is worthy of attention. Zhongjin believes that the market's digestion of risks may not be immediate. Zhongjin's main points are as follows: The trio of a new chapter in order may already be shaping a new order in commodity pricing. In the first half of 2026, the commodity market emerged from weak expectations and low volatility, regaining volatility and attention. In the annual outlook report on commodities "The Trio of a New Chapter in Order" released in November 2025, Zhongjin proposed three investment themes worth paying attention to in the global commodity market under the new changes in global macro order, namely: geopolitical games, strategic security demands, and growth in emerging demand. Since the beginning of the year, whether it is the trend continuations in base and precious metals or the reversal cash-ins of energy and Shenzhen Agricultural Power Group, Zhongjin believes that the high volatility in the commodity market may be a manifestation of the trio as scheduled. Firstly, geopolitical games and resource protectionism may be reshaping the supply curve of commodities. The oil and gas supply in the Middle East was the hardest hit in the US-Iran conflict, the regional supply side disturbance of base metals is shifting towards policy constraints, and the global fertilizer supply elasticity of Shenzhen Agricultural Power Group is being weakened by the US-Iran conflict. Secondly, strategic hoarding may be changing the demand structure and inventory cycle of commodities. Along with the reconstruction of the global monetary system and intensified geopolitical games, countries' demands for strategic security may see a systemic increase, with direct projections in the commodity market being the construction of inventory reserves; Zhongjin believes this may have a significant impact on the traditional demand structure and inventory cycle of the commodity market, and the challenges to spot trade flow and pricing mechanisms may also be hard to ignore. Lastly, AI-driven new commodity demand growth may be transitioning from accumulation to fruition. Looking at the total volume, AI-driven structural dividends are expected to be fully released. At the micro level, AI is evolving from the traditional "low power, distributed" to "ultra-high power density", driving an increase in copper consumption intensity per unit power. The aftermath of geopolitical tensions will build the main theme of commodity fundamentals in the second half. Looking ahead to the global commodity market in the second half of the year, although there are signs of marginal easing in US-Iran tensions, supply losses have already formed, derivative impacts are unfolding, energy inflation is difficult to avoid, and demand response is worthy of attention. Zhongjin believes that the market's digestion of risks may not be immediate. Specifically, on the supply side, from a quantity perspective, the resumption of oil traffic in the Strait of Hormuz and the resumption of aluminum electrolysis may still take time, while shortages of diesel, sulfur, and fertilizers as important production materials are fermenting potential impacts on the metal ore end and the spring planting side of Shenzhen Agricultural Power Group. From a cost perspective, the rise in oil prices will also lead to a comprehensive upward shift in the cost curve of commodities by pushing up mining, smelting, planting, and transportation costs. In short, cost curve inflation is easy to quantify, but the impact of quantity loss on balance is still uncertain, and the interplay between quantity and price impacts often appears intertwined. On the demand side, the constraints of high inflation on macro monetary policy have begun to emerge, with damage and substitution of micro demand under high prices gradually appearing, either manifested in the continued strengthening of energy interconnections in Europe and America, or an unexpected increase in demand for Eurasian green energy, biofuels, or even coal. Furthermore, after the conflict, the demand for strategic reserves of base metals and oil and gas may continue to increase. In general, short-term risks can be mitigated, but the long-term effects are far-reaching. Zhongjin believes that changes on the demand side are not only one-time but more structural. The remaining risks of global climate disturbances must not be overlooked. Currently, the El Nio phenomenon continues to develop, becoming a core incremental variable in the commodity market in the second half of the year. Specifically, Shenzhen Agricultural Power Group is more significantly affected by climate impacts. Southeast Asia's high temperature and drought directly suppress palm oil supply, combined with the current low global palm oil inventory for three years, increased global biofuel policies, and significantly increased price elasticity of fats and oils. Expectations of reduced production in the main natural rubber producing areas, combined with downstream new energy tire demand, provide strong support. As for other sectors, in terms of energy, high temperatures may increase electricity demand, while domestic hydropower generation during the flood season may be limited, and demand for coal power may support the fundamentals of thermal coal. In terms of base metals, the South American heavy rain may disrupt copper mining and transportation, the risk of drought and power shortages in Indonesia may rise, combined with accidents in previous mining areas, further intensifying disturbances in nickel and copper supply. Risk reminders: Geopolitical surprises, unexpected trade policy adjustments, economic growth falling below expectations, extreme weather.