As the scope of geopolitical conflicts in the Middle East continues to expand, the flames of war have gradually spread to Gulf Cooperation Council countries such as Saudi Arabia, the United Arab Emirates, and Qatar. The conflict has directly affected the only maritime passage between the Persian Gulf and the Indian Ocean—the Strait of Hormuz, known as the "world's oil valve." Due to its narrow waterway, which is vulnerable to blockade or attack, more than 10 ships have been sunk since the outbreak of the conflict. On March 9th, Mojtaba, the son of Khamenei, was elected as the third Supreme Leader of Iran, and he holds a tough stance. At present, the navigation channel of the Strait of Hormuz is still blocked.

Recently, the oil flow through the Strait of Hormuz (4-day moving average) has decreased by 19.4 million barrels per day, basically maintaining at a very low level of 600,000 barrels per day, causing a serious impact on the supply of crude oil, and the prices of energy and chemical varieties have strengthened significantly. However, the prices of non-ferrous metal varieties have declined significantly.

From a macro perspective, the impact on non-ferrous metal varieties is transmitted through three main paths: First, a strengthening of the US dollar index (peaking above 100). Second, a significant rise in oil prices driving global inflation expectations, weakening the expectation of a US Fed rate cut and even turning to an expectation of rate hikes. According to relevant data analysis, a 10% increase in crude oil prices would lead to a 0.2 percentage point increase in the US Personal Consumption Expenditure Price Index (PCE) and a 0.04 percentage point increase in the core PCE. Third, the rise in crude oil prices triggers expectations of a global economic recession, affecting demand.

Supply contraction, aluminum prices relatively resistant to decline. Aluminum production in the Middle East accounts for about 10% of the global total production, and there is a risk of contraction in aluminum supply, which will further affect the tightness of global aluminum supply and demand in 2026. At the same time, the rise in alumina prices, the rise in energy prices, and the strengthening of aluminum smelting costs will further consolidate the foundation for the strengthening of aluminum prices.

Energy and key material supply constraints will impact the semiconductor manufacturing industry in South Korea and Taiwan (power outages or voltage fluctuations may result in the scrapping of entire batches of wafers). South Korea and Taiwan are 95% and 85% dependent on energy imports, respectively. At the same time, special gases related to semiconductors also rely on imports from GCC (Gulf Cooperation Council) and Israel. Tin is a key material for semiconductor packaging, and from a long-term perspective, the strategic scarcity of tin has not changed.

Lithium carbonate inventory is low, the fundamental bottom is clear. The supply and demand pattern is improving, inventory continues to decline, and the price of lithium carbonate performs better than other metals. In March, the sales of new energy vehicles rebounded, and the rise in oil prices has improved the cost performance of new energy vehicles, which is expected to further enhance the willingness to buy new energy vehicles. The increase in battery capacity exceeds expectations, and the demand for power batteries still has resilience. The downstream开工rate of energy storage maintains a high level, and the demand growth is expected.

Industrial silicon has a cost-lifting expectation, and the price of polycrystalline silicon continues to be weak. The supply of industrial silicon continues to grow, and the downstream purchase maintains a weak and stable pattern, with inventory at a high level. However, the valuation of industrial silicon is low, and the rise in energy prices may strengthen the cost support for the price of industrial silicon. The price of polycrystalline silicon continues to be weak, and the expectation of supply contraction after the failure of the expectation, the inventory continues to accumulate. In terms of valuation, at present, the price of polycrystalline silicon has broken through the average cost line of the whole industry, and it is expected that the weakness is difficult to change, and the change of industry policy needs to be focused on.

Copper prices are suppressed by inventory and macro factors. When copper prices fell to about 92,000 yuan/ton, the enthusiasm of downstream buyers rebounded, supporting a slight recovery in copper prices. If the copper inventory continues to decline in the peak season, it will provide support for copper prices.

Overall, investors need to continue to pay attention to the progress of the geopolitical conflict in the Middle East. If the oil price continues to maintain a high level or even rises above $120 per barrel, it will have a significant impact on the global economy, and the metal sector may continue to be under pressure. If the conflict ease, the prices of aluminum, nickel, tin, and lithium carbonate are expected to recover.

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