[Huawen Daily Viewpoint 0401] Expectations for peace talks rise, crude oil sector weakens

Black Sector

【Steel】

Crude oil prices have fallen sharply, loosening cost support. On the demand side, downstream industries have entered a peak-season phase, and steel demand has been continuously released and rebounded. Rebar demand has maintained an improving trend both month-over-month and year-over-year. Plate demand remains at a high level, with relatively strong demand resilience. On the supply side, steelmakers’ profits are at a low level, and steel output is trending toward stabilization at a low level; year-over-year, it still remains in a declining state, so supply pressure is relatively small. On the cost side, driven by the sharp drop in crude oil prices, expectations for lower steel production costs have strengthened, and cost support has loosened somewhat. Overall, in the short term, due to fluctuations in energy prices, downward pressure on steel costs has increased further and will need time to be absorbed; but in the medium to long term, as the continued release of the effectiveness of macro policies enables downstream demand to improve further, expectations for improved steel supply and demand remain relatively strong. Steel prices are expected to continue the pattern of range-bound rebound.

【Iron Ore】

Supply-demand contradictions are strengthening, and iron ore prices are oscillating at high levels. On the demand side, steel mills’ restart progress is gradually improving, blast furnace iron volume continues to rebound, and iron ore demand continues to improve. The second quarter is usually the production peak season for steel mills, so iron ore demand is expected to further improve. On the supply side, overseas mine shipments have dropped sharply; year-over-year, growth has turned into decline, and growth expectations on the supply side have become more contained. Overall, in the short term, affected by crude oil prices, iron ore faces some pullback pressure; but in the medium to long term, the supply-demand contradictions of iron ore are expected to gradually intensify, providing strong support and driving force to iron ore prices. Iron ore prices are expected to continue with a行情 of oscillating upward.

【Coking Coal】

The situation between the U.S. and Iran is repeatedly uncertain. The Strait of Hormuz has not been fully opened. Crude oil remains in high-level range-bound volatility. Speculative sentiment for coal-to-power substitution is gradually being de-sensitized. The pricing logic for coking coal is returning to domestic fundamentals. On the supply side, supply is overall abundant. In China, 523 coking coal mines’ daily average output of raw coal has hit a 10-month high; coal mines and washing plants mainly ship actively. For Mongolian coal via the Ganqiimodu port, clearance volumes are operating at a high level, and the bonded supervisory area continues to accumulate inventory. On the demand side, earlier downstream customers replenished inventory ahead of time due to energy concerns. The online auction sell-through rate fell to only 0.5%, and成交 was at a six-month high. In recent days, market sentiment has cooled down; hauling from mining areas has decreased, and high-priced coal types have seen a modest pullback. On the inventory side, social inventories increased by 167.6 thousand tons week-on-week to 25.3085 million tons, reaching a one-month high, with inventory shifting toward midstream and downstream. After Qingming, the end of stock replenishment will test terminal demand; in the short term, it will likely maintain a wide-range oscillating pattern.

【Coke】

In the short term, coke’s supply-demand structure is relatively loose. Profit per ton for coke has narrowed slightly but remains overall acceptable. Coke-plant operating rates are stable to slightly higher, and daily output remains steady. On the demand side, steel mills’ profitability is improving and they are continuously resuming production. Coke’s rigid demand has improved markedly. Coke producers’ shipments are smooth; earlier inventory has been largely consumed. Some coke producers are reluctant to sell. The main coke producers’ price-increase letters have not yet received acceptance from steel mills. On the inventory side, comprehensive inventories across all links increased significantly by 201.9 thousand tons to 10.7123 million tons, setting a new high for more than 1 year and also for the same period over the past four years. Coke producers’ inventories dipped slightly. The 18-port coke inventory is approaching a 11-month high. After steel mills replenished stocks, inventories increased synchronously. Downstream has relatively low acceptance of high prices; only a small amount of low-priced replenishment occurs, and inventory accumulation pressure becomes more visible. After geopolitical disturbances weaken, the market is led by fundamentals. In the short term, the market will maintain an oscillating trend.

【China-Europe Shipping Index Line】

Shipping companies are very likely to continue price-support operations in May. However, the delivery pricing for the 2605 contract is based on three-week freight indices of 19, 20, and 21. Among them, week 19 includes the May Day holiday, so freight rates are likely to follow the late-April trend. The 2606 contract, as the benchmark product, is more driven by macro geopolitical sentiment. Due to influences from external sentiment, there is a possibility of a high-open move, so one-way trading risk is relatively large. You may focus on tracking the opportunity for mean reversion and repair after the month spread deviates.

Energy & Chemicals Sector

【Methanol】

Today, methanol prices have fallen sharply, closing down 6.66%. This week, methanol enterprises’ inventories and port inventories have gone down as expected. The力度 of the decline in port inventories is still better than expected. This week, port methanol inventories continued to fall substantially, with the impact of geopolitical conditions persisting. Next week, import net demand may remain weak, and there is still export support for lifting cargo. However, the arrival volume of foreign vessels is also staying at a low level. It is expected that port methanol inventories may continue to decline next week; specifically, monitor unloading speed and changes in lifting volume. In the domestic regions this week, inventories at methanol sample enterprises fell as expected. The reality of continuous inventory reduction along the coast remains. The regional arbitrage between domestic and port areas will continue to support domestic inventory reduction in the short term. Looking ahead to next week, based on expectations of continued inventory reduction along the coast and relatively stable supply and demand in domestic areas, domestic plants are expected to maintain inventory reduction. This week’s plan includes increased restart of units; the planned maintenance and reductions in production units are fewer, so the expected recovery volume is greater than the loss volume, implying that overall market supply may increase. This week, olefin demand increased. MTO industry operating rate expectations have risen to above 90%; traditional downstream demand also increased. Concerns about geopolitical developments in the Middle East continue to ease, and methanol prices have been continuously unwinding the geopolitical risk premium. Increased shutdowns of overseas plants further enhance expectations of reduced import volumes. Domestic production has risen slightly, but it cannot fully offset the impact of declining imports. Olefin units continue restarting and increasing load, and traditional demand also continues to grow. Port inventories and enterprise inventories both remain in a downward channel. Overall, with supply decreasing and demand increasing in fundamentals, and with there still being uncertainty in the Middle East situation, methanol futures prices may remain broadly strong with wide-range volatility until the Middle East geo-conflict is actually over. Continue to track overseas plant conditions and the progress of navigation through the Strait of Hormuz.

【Urea】

Today, urea prices follow the overall energy & chemical commodities lower, closing with a clear decline. The domestic urea enterprises’ inventory decline rate is still better than expected. Recently, downstream industrial operating rates are relatively high. Although agricultural demand has weakened, industrial demand continues to advance, supporting smooth urea shipments. Some urea plants have plans that are relatively tight, with no inventory. Some plants that had previously shut down are resuming operations, and daily output is slightly higher. On the demand side, entering April, the agricultural “returning-green” fertilizer demand is basically completed; in some areas, it may only be sporadic transactions, along with progress on a small amount of agricultural reserve demand. Composite fertilizers, board products, melamine, and other industrial operating levels remain at high levels, so urea demand is relatively stable and still has support. However, due to policy interventions, downstream buyers mostly conduct rigid-demand purchasing. The domestic urea market overall maintains a pattern of stable plant prices and slightly tight spot supplies. Enterprise offers are generally stable. In main production areas, factory waiting orders are still acceptable and inventories are at low levels, so there is a strong willingness to support prices. Due to regional logistics and the pace of order release, some regions experience structural tightness in available goods. Middlemen’s circulating spot supply is limited, so traders’ spot quotes are generally higher than plants’ offers. On the demand side, there is a pattern of alternating agricultural and industrial demand. Although agricultural demand has fallen compared with earlier peaks, it still has support from sporadic replenishment. For industry, composite fertilizer and board industries maintain rigid-demand purchases. High daily output and stable-price policy suppress upside room; in the short term, it is unlikely to see a trend-breaking breakthrough. Urea futures prices also fall in sync, driven by bearish sentiment from the broad drop in the energy & chemicals complex. But if the broader energy & chemicals sector stabilizes overall, there may be a chance for urea futures prices to rebound.

【Soda Ash】

Today, soda ash’s benchmark 2605 contract continues to oscillate and fall downward. This week, supply has contracted somewhat. Soda ash overall capacity utilization rate is 81.87%, down 4.51% week-on-week. Weekly production is 775.4 thousand tons, down 5.22% week-on-week. Among them, ammonia-alkali capacity utilization rate is 90.45%, flat week-on-week. Combined-alkali capacity utilization rate is 76.17%, down 3.81% week-on-week. Both light and heavy quality soda ash output has fallen; industry supply has shrunk noticeably due to maintenance. On the demand side, it may continue to remain weak. Core downstream flat glass (float glass) weekly output is down 0.77% week-on-week and down 8.47% year-on-year. Industry operating rate is flat, and capacity utilization rate has edged down slightly; overall operations remain at a low level. Soda ash weekly dispatch volume is 820 thousand tons, down 7.56% week-on-week. Dispatch rate is 100.23%, down 9.39% week-on-week. Downstream purchasing willingness is lackluster, and demand remains weak. On the inventory side, inventories continue rising. The latest total soda ash factory inventory is 167.6k tons, up 129 thousand tons from last Thursday. Of this, light soda ash is 9.304 million tons, down 162 thousand tons week-on-week; heavy soda ash is 201.9k tons, up 291 thousand tons week-on-week. On the profit side, pressure remains. The combined-alkali method’s theoretical profit is 215 yuan/ton, down 5.49% week-on-week. The ammonia-alkali method continues to incur losses to -26.20 yuan/ton. With cost pressures rising and soda ash prices staying stable, industry profits remain under sustained pressure. Overall, industry fundamentals show a weak balance. Although supply declines in the short term, after upstream and midstream/dowstream finished receiving earlier, inventory turns back toward accumulation. In the short term, soda ash may continue with low-level volatility.

【Glass】

Today, the glass benchmark 2605 contract oscillates and moves lower. The impact of cold shutdown maintenance continues; industry supply remains in a low-level contraction. Weekly national float glass output is 775.4k tons, down 0.77% week-on-week and down sharply 8.47% year-on-year. Daily output is 820k tons, down slightly 0.62% week-on-week. Industry daily operating rate is 70.41%, flat week-on-week. Weekly average operating rate is 70.12%, and capacity utilization rate is 72.78%, both down slightly week-on-week. Overall supply is at a low level for the same period in recent years. On the demand side, prices at Shachang area factories show no fluctuation; market transactions are flexible, and some old inventory moves at low prices. The East China market sees little change; demand weakness is hard to change, so companies mainly focus on shipments. Midstream and downstream procurement maintains rigid demand. In Central China today, the price of whole sheets is temporarily stable; some enterprises cut low-e prices by 1 yuan per square meter. On the inventory side, total inventory for national sample enterprises is 1.86M weight units (standard cases). Week-on-week it is down 1.09%, and year-on-year up 9.86%. Inventory days (in terms of stock) are 33.6 days, down slightly week-on-week. Except for a slight increase in Northwest inventories, inventories decline week-on-week in all other regions. Overall inventory remains at a high level; the inventory-reduction pace is slowing. Combined with weak demand, industry profitability remains under pressure. Overall, the glass market fundamentals show a weak balance: small-scale inventory reduction, but later production and sales may be difficult to sustain. Demand is unlikely to rebound, so the industry overall remains weak.

【Caustic Soda】

Today, the caustic soda 2605 benchmark contract continues to oscillate and fall. On the supply margin, there is a rebound. The average capacity utilization rate of domestic sample enterprises is 84.6%, up 0.7% week-on-week. Operating rates in North China, Central China, East China, and South China caustic soda & chlor-alkali loads have increased. In Northeast China, loads fell first and then rose, driving nationwide supply to remain steady-to-higher. In the future, there are expectations for further recovery of equipment that will reduce loads in North China; in the short term, supply still has upside room. On the demand side, core downstream demand is mostly supported by rigid demand. The aluminum oxide industry’s procurement demand remains stable, forming the core demand support. Non-aluminum downstream such as viscose staple fiber maintains normal operating rates, and rigid-demand procurement remains stable. In domestic trade, most downstream buyers purchase on rigid demand. High prices slow down small traders’ purchases. For foreign trade, orders are smooth, forming demand supplementation. Overall, demand has not seen a significant volume expansion. On the inventory side, inventories accumulate again. Nationwide liquid caustic soda sample enterprise plant stock is 12.9k tons (wet tons), up 4.93% week-on-week and up 14.28% year-on-year; the tank utilization rate is 28.84%, up week-on-week. Inventory differentiation by region is significant. North China, East China, and South China are accumulating inventory; Central China and Northwest are seeing inventory declines. Overall, inventories are at a level higher than year-on-year. At present, caustic soda’s short-term performance is pressured by relaxed supply, intensified accumulation of plant stocks, and the waning of export core positives. The futures market is running weakly. For the medium term, focus on the rollout progress of April spring inspections at plants, the continuity of export orders, and the replenishment pace of rigid demand from aluminum oxide. If maintenance exceeds expectations or exports rebound, prices may repair; otherwise, weak range-bound volatility may continue.

【Asphalt】

Today, asphalt prices have fallen sharply, closing down 5.05%. Due to both the U.S. and Iran indicating willingness to end the Middle East conflict, the risk premium previously priced into the market due to fears of supply disruption has been quickly unwound, and international crude oil prices have fallen sharply. This week, asphalt plant stocks unexpectedly accumulated, and social inventory has continued to increase as expected. Although there are signs of supply rising after some domestic refineries resume production, overall supply levels remain low. Plant stocks may continue the trend of declining stocks, but social inventories will keep accumulating. Domestic asphalt producers continue operating at low load; the available spot asphalt in the market is tight. Due to weather differences between north and south, northern temperatures gradually rise and downstream demand shows improving signs. In the south, more rainy weather plus weaker high-price成交 weigh on prices downward. With profits narrowing, some refineries reduce crude processing volumes. Asphalt production shutdowns and switching to processing residual oils help support prices from the supply tightness side. However, terminal demand is still sluggish; especially high prices suppress buyers’ purchasing enthusiasm. Actual trading is average; refineries mainly deliver orders under contract terms. Although plant stock declines are still possible, social stocks increase. Fundamentals of supply and demand have not yet improved significantly. Combined with the collapse of cost-side support, asphalt futures prices may maintain a weak trend in the short term.

【Polyolefins】

Today, polyolefin prices keep falling, closing clearly lower; the PP decline is larger than that of plastic. As both the U.S. and Iran release intentions to end the Middle East conflict, the risk premium previously priced in due to fears of supply interruption has been quickly unwound, and international crude oil prices have fallen sharply. Because many plastic-producing companies have stopped for maintenance, supply continues to decrease. Second, downstream factories gradually accepted high prices, strengthening rigid-demand replenishment efforts. In addition, as month-end approaches, producers’ performance evaluations are based on monthly plan quantities, and inventories at producers are smoothly transferred downward. Meanwhile, inventories accumulate faster in the hands of traders and hedgers, and inventory transmission downward is blocked. Therefore, plastic producers’ inventories decline while social sample warehouse inventories accumulate. At the beginning of the month, market shipping pressure decreased, and the concession amount slowed down; digestion of the decline becomes the main theme. There is an expectation that market supply will decrease, which provides some support. The price focus shifts slightly downward, and trading slows modestly. Downstream PP demand follows gradually. High raw material prices reduce downstream purchasing enthusiasm. PP producers gradually shut down or reduce load, and inspection-related losses in domestic units increase. This week, producers’ inventories decline month-to-month. The domestic polypropylene market has maintained high prices for the long term, affecting downstream factories’ willingness to take goods. For traders’ sample enterprises, it becomes more difficult to reduce inventory, leading to a slight increase in inventory. The Strait of Hormuz blockade and overseas force majeure have caused a sharp reduction in Middle East, Southeast Asia, and Korea import supplies. The advantage of stable China supply becomes apparent, and export volumes expand to fill global gaps. While the reduction in imports provides a basis for port inventory decline, the export diversion effect becomes visible, leading to the overall pace of inventory destocking being slower than earlier. Downstream remains cautious about high-priced raw materials and purchases on demand. However, maintenance and load reductions reduce losses; overall, supply-side support is positive. On the supply side, load reductions and maintenance loss rates are high, supporting supply-side optimism. On the demand side, high-priced goods are still resisted; purchases are on demand. But in the short term, cost-side collapse and continued bearish sentiment may keep polyolefin futures prices weak.

【Polyester】

(1) PTA? (Actually: PX) Para-xylene (PX). Last week, PX output was 720.6 thousand tons, down 2.4% week-on-week. Domestic PX average weekly capacity utilization rate was 87.12%, down 2.14% week-on-week. Asia PX average weekly capacity utilization rate was 77.01%, down 2.29% week-on-week. On the demand side, downstream PTA units’ operating rates remain high, production remains at a high level versus the same period in recent years, and polyester terminal daily output is still expected to rebound, so the medium-to-long term supply-demand expectations for para-xylene may be tight. On para-xylene relative valuation, there is a pattern of rebounding from lows. Keep an eye on changes in Middle East geopolitical developments; PX may continue with oscillating and somewhat strong operations.

(2) PTA. Last week, China’s total PTA output was 1.5316 million tons, up 5.26% week-on-week and up 9.29% year-on-year, and weekly output rebounded notably. Downstream is in a peak demand season. Last week, PTA market prices pulled back, and downstream polyester demand recovered. Last week, PTA plant inventories were 5.85 days, down 0.07 days from last week; compared with the same period last year, they were somewhat accumulated. Polyester plant PTA raw material inventories were 8.16 days, down 6.64% week-on-week, and down 16.31% versus the same period last year. Overall, PTA weekly output rebounded last week, both plant-side and downstream inventories were digested, and demand warmed up. Due to disturbance from Middle East geopolitical conditions, cost-side support is strong, and it may remain at a high level long term, which may suppress downstream demand. In the near term, pay attention to changes in Middle East geopolitical conditions and be alert to the risk of a sharp drop in crude oil prices.

(3) Ethylene glycol. Last week, China’s total ethylene glycol output was 375.6 thousand tons, down 0.05 thousand tons versus the previous period; it was slightly lower month-on-month. The ethylene-based ethylene glycol unit operating rate rose to 56.15%; coal-based ethylene glycol operating rate fell to 61.12% due to the maintenance plan, down week-on-week and also down year-on-year. At present, ethylene glycol supply remains at a normal level for the same period in recent years. Recently, it is in a peak demand season for textiles and bottle chips. With upstream raw material prices easing, downstream demand has improved. In Jiangsu and Zhejiang, textile weaving and printing & dyeing operating rates continue to rise, and terminal textile demand is recovering. On March 30, MEG inventories at the main East China port areas totaled 953 thousand tons, up 0.1 thousand tons from the previous period. If shipping through the Strait of Hormuz continues to be interrupted, social inventories of ethylene glycol may continue to decline. In the domestic short term, ethylene glycol supply remains at normal levels. Downstream demand slightly reduces, and inventories are still expected to be destocked. Monitor Middle East geopolitical developments.

(4) Short fiber. On the supply side, China’s polyester staple fiber output is 16.2k tons, up 0.94 thousand tons week-on-week, an increase of 6.09% week-on-week. In the period, the average comprehensive capacity utilization rate is 84.96%, up 4.94% week-on-week. On the demand side, polyester staple fiber factories’ average production-sales ratio is 60.50%, up 9.36% from the previous period. During the cycle, spot prices of polyester staple fiber are weak and range-bound, and downstream maintains rigid-demand replenishment. Recently, due to a sharp rise in upstream raw material prices, downstream buyers have reduced willingness to take goods and are more resistant to high-priced raw materials. Currently, pressure from staple fiber inventories at factories is limited. Influenced by the cost side and supply-demand dynamics, staple fiber futures may show oscillating and slightly stronger performance. In the future, keep an eye on Middle East geopolitical changes.

(5) Bottle chips. On the supply side, polyester bottle chip output is 934.4k tons, down 0.6 thousand tons from the previous period, and capacity utilization rate is 71.57%, down 1.3 percentage points from the previous period. On the demand side, bottle chips are currently in a peak demand season. Combined with production preparation by beverage manufacturers in March to May, overall demand expectations are relatively strong, and factory bottle chip inventories have been destocked to a low level for the same period in recent years. Recently, cost-side support is strong. The current level of bottle-chip gross margins is relatively high and may be difficult to sustain. It is expected that bottle chips will oscillate. Monitor the recovery progress of supply-side unit operating rates.

【Pure Benzene & Styrene】

Pure benzene’s operating rate last week was 72.57%, down 2.7% month-over-month. Weekly output was 420.7 thousand tons, down 2.69% month-over-month compared with the previous period; output remains at a high level versus the same period. Downstream demand overall remains at a high level for the same period. Caprolactam output is stable. Phenol and aniline’s weekly output continues to maintain year-over-year growth. Pure benzene downstream demand has slightly contracted but remains relatively strong. On Monday, pure benzene inventories fell back to 29.1k tons. Compared with previous-period inventories of 2.69 million tons, it declined by 0.9 million tons, down 3.35% month-over-month. Last week, China’s styrene plants’ overall output was 144.9k tons, down 0.72% month-over-month. Plant capacity utilization rate was 69.95%, down 0.51% month-over-month. Downstream 3S production last week declined slightly. Inventory pressure in downstream chemical products remains low, and demand remains strong. Last week, on Monday, the total inventory of styrene at the Jiangsu port sample was 525.4k tons, down 0.078 million tons versus the previous cycle, a decline of 4.63%. The supply-demand structure of styrene continues to improve. It is expected that in the near term it may trade with volatility but on the stronger side.

【LPG】

Last week, LPG weekly output was 720.6k tons. Compared with the previous period’s 375.6k tons, it decreased by 500 tons week-on-week. Supply is tightened, and supply levels remain at a neutral level for the same period in recent years. LPG arrival volumes are at a neutral level for the same period. China’s port LPG inventories remain at 2.3396 million tons, neutral overall. Changes from the previous period’s inventory are limited. On the plant side, inventory declined from 0.1808 million tons to 0.1706 million tons. Downstream chemical demand overall remains stable. Both MTBE and alkylation oil operating rates have recovered. The PDH unit operating rate has slightly decreased. Keep an eye on crude oil price movements; in the near term, it may follow cost-side changes. Currently, LPG faces some risk of import reductions. The market expects LPG supply to tighten, which may lead to LPG supply-demand being tight. Monitor Middle East geopolitical developments, and take risk control seriously.

Nonferrous Metals Sector

【Copper】

At the macro level, according to media reports, Iranian President Pezeshkian stated that Iran is willing to end the war, but on the condition that its demands are met—especially receiving guarantees that it will not be subjected to aggression again. On March 31, U.S. President Trump said at the White House that the U.S. will end its war against Iran within “two to three weeks,” and an agreement may be reached with Iran before then. On fundamentals, mine-side supply is still tight, and mining companies face challenges of a sulfuric acid supply shortage and soaring prices. With copper prices rebounding, holders of recycled copper raw materials ship at higher prices, but scrap copper supply is still far from loose; supply of scrap refined copper, and anode sheet supply is also clearly shrinking. On the news front, Ivanhoe Mines released updated production guidance. Ivanhoe Mines’ Kamoa-Kakula expects 2026 anode copper production of 290,000–330k metric tons; 2027 anode copper production of 380,000–420k metric tons, which is 90k metric tons less than the earlier 2026 expectation of 380,000–420k metric tons. On the refining side, China’s refined copper production in March increased by 953k tons month-over-month, hitting a historical high. Sulfuric acid prices hit a historical high; in some regions, they reach up to 1600 yuan/ton, allowing smelters to maintain high operating rates under deep negative processing fees. In April, eight smelters are scheduled for maintenance, and some smelters stated that purchasing anode sheets is difficult, with relatively tight raw materials creating pressure. April is expected to see production decline by 0.33 million tons month-over-month. In May, the impact of concentrated electrolytic copper plant maintenance will be evident. It is expected that production will continue to fall month-over-month compared with April. On the consumption side, as copper prices rise, downstream companies become more cautious, and previously more active procurement pacing has slowed. In terms of inventory, domestic copper social inventories have declined significantly. Overseas LME copper inventories have stopped increasing and recently returned to falling, and COMEX copper inventories also declined. Overall, in April, copper fundamentals are expected to improve. Combined with a better macro market sentiment, Shanghai copper is expected to run relatively strong in the short term. Still, remain alert to the risk of escalation of conflicts in the Middle East.

【Aluminum & Aluminum Oxide】

Domestic ore supply is relatively abundant, and imported ore prices have risen somewhat. Pay attention to how Middle East developments affect freight rates and fuel supply in Guinea. In aluminum oxide, last week a certain aluminum oxide plant in Guangxi officially started production, driving aluminum oxide weekly output to rebound. It was up by 300 thousand tons week-on-week to 1k tons. Also, it is understood that a certain aluminum oxide plant in Guangxi is expected to feed production at the beginning of April. Two production lines will start up simultaneously, involving capacity of 2 million tons per year. For electrolytic aluminum, China’s electrolytic aluminum production in March grew 1.6% year-over-year and increased 10.7% month-over-month. Overseas electrolytic aluminum production in March slightly increased by 0.2% year-over-year, while daily output decreased 2.7% month-over-month, mainly because in March, Mozambique and Middle East aluminum plants saw large-scale reductions and shutdowns. In the aluminum processing sector, China’s domestic downstream processing leading companies’ operating rates continued to rebound month-over-month. Consumption gradually returns to the peak season, but the overall level is still below the same period last year. On inventories, domestic aluminum oxide inventories keep accumulating, while electrolytic aluminum inventories increase inside the country but decline overseas. Overall, the pressure on the aluminum oxide supply side remains high. In the short term, aluminum oxide futures may continue to trade at low levels. Watch for support from previous lows and monitor Guinea policy progress. For electrolytic aluminum, with reduced supply and macro sentiment working together, Shanghai aluminum in the short term is expected to remain firm.

【Zinc】

In March, China’s zinc concentrate processing fees remain at a low level. Currently, smelters’ profits excluding sulfuric acid and excluding byproducts suffer losses of around 2000 yuan/ton. However, with prices of sulfuric acid and minor metals staying high due to ongoing geopolitical issues, smelters’ profits remain relatively good, and production in March has been fairly active. In April, some smelters conduct regular maintenance. Refined zinc production is expected to decline month-over-month. On the consumption side, in March, domestic zinc downstream companies gradually resumed operations. Environmental disruptions from the North occur frequently, and overall resumption is not as expected. In April, the telecom tower company will begin a new round of tenders. Power-related orders are relatively strong. Export orders still show resilience. Due to the later timing of the Spring Festival holiday, demand appears with some delay, but consumption expectations in April are better. On the inventory side, zinc inventories are being destocked both domestically and externally in recent days; watch for subsequent developments. Overall, with many disturbances on the overseas mine side and limited improvement on the raw material side, refined zinc supply is still staying at a high level. Going forward, watch downstream consumption trends. With inventory destocking expectations, in the short term Shanghai zinc’s trend may still focus on testing up.

【Lithium Carbonate】

Today, lithium carbonate’s 2605 benchmark contract is running with wide-range volatility. On the supply side, the latest weekly lithium carbonate output is 23.2 thousand tons, up 1.31% month-over-month. Overall capacity utilization is 49.47%, and industry operating rates still remain at a neutral level. In the short term, there is limited room for supply to expand. The suppression from increased imports in January and February has been gradually digested by the market. Overseas supply disruptions are brought by policy changes from Zimbabwe mines. As lithium spodumene prices rise along with the futures, cost-side support continues to strengthen. On the demand side, energy storage demand is recovering steadily. In late March, bidding scale increased significantly. The operating rate of lithium iron phosphate remains at a high level of 74%, with top companies running at full capacity. The weakness of new energy vehicle terminal demand has already been fully priced by the market. With subsequent consumption recovery and policy implementation, demand increment is expected. Downstream buyers have strong willingness to replenish at dips, and demand-bottom support is solid. On the inventory side, total social inventory is 100.4 thousand tons, up slightly 0.41% month-over-month, and overall inventory pressure is controllable. Upstream lithium salt plants ship smoothly and destock at a steady pace. Trade-side inventories continue to destock. Only downstream replenishing at dips results in a slight inventory build. Overall, although uncertainty from geopolitical issues remains relatively large in the later stage, industry supply and demand are still in a tightening state. The strong long-term logic for lithium carbonate remains unchanged. Monitor the later Australia and Zimbabwe ore arrival volumes, because short-term shortages on the mine side remain an important driver of price pulse volatility.

Agricultural Products Sector

【Cotton】

On April 1, Zhengmian’s benchmark contract CF05 closed at 15,245 yuan/ton, down 85 yuan/ton from the prior trading day. Affected by USDA’s publication showing an increase in U.S. cotton planting area, ICE U.S. cotton spiked intraday but eventually gave back the gains, while domestic futures for cotton weakened because bullish sentiment diminished under the report’s negative implications. The spot market overall was stable with a slight uptick. According to market quotes in different regions, the mainstream price of Xinjiang machine-picked cotton 3129B (strength 29) ranges from 16,730 to 17,230 yuan/ton, mostly up by 50 yuan/ton. Downstream spinning enterprises maintain rigid-demand purchases on orders, and成交 is relatively dull. On the demand side, according to Mysteel data, as of the week of March 27, the spinning mills’ operating rate reached 78.5%, staying at a high level versus the same period in recent years, supporting cotton’s rigid consumption. But the weaving mills’ operating rate is only 43.5%; terminal orders show no obvious improvement, limiting the strength of inventory replenishment. On the supply side, the new crop cotton is about to enter the key sowing period, but the current focus is still on pressure from commercial inventories. According to China Cotton Information Network data, as of the end of March, national cotton commercial inventory is about 5.2 million tons, still at a high level for the same period in history. The domestic-foreign cotton price spread has narrowed; imported cotton offers relatively low cost performance. Combined with thin downstream profits, it limits purchasing enthusiasm for raw materials. In the short term, cotton prices may continue with a range-bound consolidation pattern.

【Sugar】

On April 1, sugar futures’ benchmark contract SR605 closed at 5,356 yuan/ton, down 42 yuan/ton from the prior trading day, continuing the recent pullback trend. Spot prices in domestic main producing areas have generally weakened. Quotes in Nanning and Zhanjiang are 5,420 yuan/ton and 5,400 yuan/ton respectively; Kunming is 5,250 yuan/ton. Overall, it is slightly down compared with last week. According to combined market information, weak terminal demand leads to pressure on the movement of syrup-related products, and price expectations are weak, weighing on the sugar market to some extent. But sugar inventory pressure is relatively small, supporting spot prices to temporarily remain stable. On the import cost side, Thailand and Brazil’s quotas’ additional processing costs have both fallen to 5,266 yuan/ton and 5,446 yuan/ton respectively, approaching or slightly above the current spot prices in the main producing areas. Import profits are basically closed, and reduced external supply shocks provide price support. The Zhengzhou Commodity Exchange’s warehouse warrants increased to 16,862 lots, up 520 lots month-over-month, indicating that delivery resources have accumulated. Currently, the market lacks significant supply-demand contradictions. Prices are trading in a range between cost support and weak demand.

【Oils & Oilseeds】

Today, the oils & oilseeds market overall shows a “strong oils, weak meal” pattern. USDA data shows that U.S. soybean inventories in Q1 reached 163.7k bushels. Combined with Brazilian, U.S. Gulf, and Argentinian soybean near-month vessel FOB quotes that are steady with slight increases, import cost support is limited. Domestic soybean meal spot prices are generally down 20–50 yuan/ton. In East China, the two lakes region, and Guangxi, quotes have dropped as well. Although the soybean meal basis remains at a high level of 347 yuan/ton, trading is lackluster, reflecting weak protein meal demand and suppression from the traditional off-season of April–May. In contrast, on the oils side, BMD crude palm oil futures have continued to strengthen to 4,729 ringgit/ton, lifting domestic palm oil spot prices to 10,030 yuan/ton (Tianjin). Palm oil’s basis has rebounded sharply to 250 yuan/ton. Soybean oil and rapeseed oil have also risen in tandem. Zhangjiagang’s Grade 4 soybean oil is quoted at 8,980 yuan/ton. The OI benchmark for rapeseed oil closes at 9,720 yuan/ton. All are supported by overseas linkage and the boost from the biodiesel theme. Bloomberg’s U.S. Dollar Index rose strongly by 2.4% in March, which may suppress the financial commodity attribute to some extent. But currently, oils are supported by improved destocking at origin and better export expectations, staying relatively strong; meal products are running relatively weak due to high inventories and weak demand.

【Live Hogs】

On April 1, the hog futures benchmark lh2605 contract closed at 9,610 yuan/ton, down 160 yuan/ton, a decline of 1.64%, extending weak operations and showing stronger bearish sentiment. On the supply side, the market is currently in the spring replenishment peak season, so short-term pressure on market-ready hogs is limited. However, winter replenishment hogs are expected to be released in a concentrated way in May–July, and longer-term supply pressure is beginning to appear. For commodity hog releases, average weight remains stable at 123.46 kilograms; inventory-holding behavior is not obvious. On the demand side, the Qingming holiday provides limited consumption boost. But with the upcoming May Day preparations, slaughter volumes have risen for two consecutive days to above 140k head, and operating rates increased to 34.04%, indicating that slaughter enterprises’ purchasing enthusiasm has improved somewhat. However, terminal consumption is still in an off-season, combined with continued losses from breeding profits, so support from the industrial chain is weak. Overall, the current pattern of strong supply and weak demand remains unchanged. Spot prices are under pressure, and futures show a structure of weakness near term but strength further out. In the short term, hog prices may continue with range-bound and weak performance; it is important to monitor the release schedule of large-scale farms, the willingness to enter by new participants, and the strength of pre-holiday stocking.

【Corn】

Today, corn futures’ benchmark contract c2605 is flat at 2,350 yuan. In the week, corn is trending range-bound to weak. USDA’s report shows U.S. corn inventories in Q1 at 9.4k bushels, and expectations for ample supply continue. Domestic spot markets overall face pressure. In the Northeast, primary producers’ grain sales at the grassroots level are close to the end. Traders’ shipping pace is steady. Prices in Harbin, Changchun, etc. are down about 0.4% week-over-week. On ports, the price spread between Bayuquan and Jinzhou has narrowed to 5 yuan, showing supply-demand in the northern ports region is moving toward balance. In southern feed-sales regions, feed companies maintain rigid-demand procurement. On the Shekou port, the price is down 0.79% week-over-week; the price advantage of substitute wheat continues to suppress corn. Basis weakness reflects insufficient spot support, and combined with DCE registered warehouse warrants falling sharply this week to 14,990 tons, the market lacks upside momentum in the short term. It is expected that corn prices will continue to face pressure. Focus on the grain sales pace of leftover supplies in North China and changes in the price spread versus substitute grains.

【Eggs】

Currently, the egg market shows an intensified game between supply and demand, with price pressure leading to range-bound volatility. The futures benchmark contract jd2605 closes at 3,415 points, down from the recent high. Spot prices in the main producing areas have fallen to 3.31 yuan per jin, while in main sales regions they are maintained at 3.35 yuan per jin, and the overall trend is weak. With Qingming approaching, there is some stocking support, but downstream purchasing is cautious, and production-sales inversion continues. Combined with high laying-hen inventory, market sentiment is more bearish. Breeding profits losses have widened to -0.28 yuan per jin, and cost-side support is limited. Inventory days in production and distribution links are stable at 0.9 days and 1.31 days respectively; inventory pressure has not yet accumulated significantly. In recent days, corn prices have differentiated by region; feed cost changes are not large, but egg-laying hen capacity remains high. New production additions and delayed culling together reinforce supply pressure. In the short term, prices may see range-bound and somewhat fluctuating moves due to holiday effects, but risks of pullback after the holiday should be watched carefully.

Article data sources: Steel Alliance (steel联数据), SMM, iFinD

Investment consulting business qualification: Shanghai Securities Regulatory Commission permission [2016] 38

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