Lead: The US-Iran conflict has now been ongoing for over 80 days, spanning 58 working days. During this period, ethylene tar has experienced significant price fluctuations. Recently, Sinopec North China's ethylene tar price has held steady at 3,350 yuan/ton for 11 consecutive days, a classic price consolidation phase at a turning point. What changes can be expected after approaching this critical level?

1. Crude Oil Situation

As of May 20, Brent crude stood at $105.02/barrel, up 44.9% since the start of the conflict. The average Brent price in May (as of May 20) was $106.86/barrel, up 4.0% month-on-month and 66.7% year-on-year. The uptrend in international oil prices in May was primarily supported by two factors: first, although US-Iran peace talks have begun, differences remain between the two sides, casting doubt on whether a comprehensive peace agreement can be reached; second, navigation through the Strait of Hormuz has not returned to normal. However, it can be observed that the May Brent average remained below the $110 level and failed to surge significantly higher. It is clearly noticeable that whenever Brent prices touch or exceed the $110 mark, the US side takes measures such as releasing bearish comments to curb the rise, reflecting that the pressure from high prices like $110 has become painful for the US. The current backdrop of high inflation combined with weak economic growth in the US means it cannot tolerate international crude oil prices remaining elevated for an extended period. Conversely, if the Iran issue remains unresolved for a prolonged period and the Strait of Hormuz continues to be obstructed, international oil prices cannot decline substantially. Therefore, the continuation of US-Iran peace talks and multiparty efforts to steer the situation back towards peace remain the general trend. It is expected that the US-Iran situation is likely to see a turning point in June-July, while prices will likely continue to fluctuate around $100 in the near term.

2. Market Reaction of Similar Products

Domestic high-temperature coal tar market prices for new orders rebounded quickly this period. Following last week's sharp decline in the coal tar market, downstream buying interest picked up. In-plant coal tar inventories declined rapidly. With overall downstream operating rates remaining high, market supply-demand dynamics tightened. Coupled with the fact that deep-processing enterprises still have some profit margins, market sentiment turned positive this week. On Wednesday, auction prices at Anhui Linhuan took the lead in rebounding, leading to strong bullish sentiment. Subsequently, auction prices in major producing regions rose one after another, with price increases in the Northwest region even exceeding 200 yuan/ton. In the short term, with both supply and demand active in the high-temperature coal tar market, there remains room for further price increases.

The carbon black market saw new orders rebound from lows this period. After low-price orders were signed earlier, the beginning of the week was mostly focused on executing existing contracts. However, mid-week saw successive increases in high-temperature coal tar tender prices, and with the expansion of price hikes in the Shanxi region, cost-side factors supported market sentiment. Traders generally held a bullish outlook. During the week, some low-priced offers increased. Downstream purchasing enthusiasm declined, with a strong wait-and-see atmosphere prevailing, limiting actual transaction volumes. Limited room for further improvement in downstream tire market operating rates and constrained upside potential for the market due to cost pressures suggest that the carbon black market is likely to see mainly narrow price stabilization adjustments in the coming period.

As of now, the slurry oil market faces more bearish factors than bullish ones in terms of news and supply-demand dynamics. Refineries lack confidence in price support. Negotiations are expected to have some room for downward adjustment, and the average price may see a slight decline compared to this week. Slag oil is pressured by bearish news and demand factors. Traders are cautious in their operations, and buying interest is insufficient. The negotiation focus is expected to decline from highs next week, but the average price may remain flat compared to this period. The wax oil market is weak in both supply and demand. Although tightening supply supports price firmness, there remains a risk of a slight decline in wax oil transactions next period, with the average price showing a marginal decrease compared to this period.

During this period, needle coke market prices remained stable. Average prices were 7,283 yuan/ton for oil-based green coke and 8,683 yuan/ton for oil-based calcined coke. Regarding raw material costs, the main transaction price for modified coal tar pitch was 4,740 yuan/ton, down 160 yuan/ton month-on-month; the average main transaction price for low-sulfur slurry oil was 4,778 yuan/ton, up 15 yuan/ton month-on-month. Raw material slurry oil continues to be in short supply, keeping costs high. On the supply side, supply remains tight. Orders for anode materials and downstream products are largely finalized. Market prices are expected to remain stable in the coming period.

3. Summary

Mainstream ethylene tar prices have been trading sideways for 11 days. The market is in a critical state where it is difficult to push prices up, yet sellers are reluctant to keep them stable. Why has the price held steady for 11 days? The main reason is the supporting force preventing a decline. Crude oil prices remain volatile at high levels, providing support for refining costs. Refineries are unwilling to sell at low prices and strongly support maintaining prices. Currently, ethylene tar prices are at psychologically low levels for downstream users. Just-in-time demand from the carbon black and pitch coating sectors provides underlying support for the market bottom.

According to a survey by chempricehub information, Yangzi Petrochemical's ethylene tar unit began maintenance in early May. Sinopec-SK (Wuhan) Petrochemical, Shenghong Petrochemical, and Hainan Refining & Chemical are scheduled to enter maintenance in June. Gulei Petrochemical remains temporarily idle, and Maoming has plans to switch to internal use. Overall, on-site supply is declining, and supply is tightening. Coupled with the boost in confidence from the high-temperature coal tar price increase, auction prices for ethylene tar have already risen. In the coming week, mainstream ethylene tar prices are expected to see a push for increases.