I. Import & Export Data: Volumes Are Rising According to customs data, China imported 4,400 tonnes of lithium hydroxide in June 2026, up 12% month-on-month and nearly triple year-on-year. Of this, 1,159 tonnes came from South Korea, accounting for 26% of the month's total imports; Chile ranked second with 993 tonnes; while imports from Indonesia remained low, with 774 tonnes arriving in June. On the export front, China exported 6,018 tonnes of lithium hydroxide in June, up 70% month-on-month, driven primarily by quarter-end shipment concentration and a modest recovery in overseas demand. Of this, 5,032 tonnes were exported to South Korea and 679 tonnes to Japan. Since 2026, China has shifted from a net exporter to a net importer of lithium hydroxide. Cumulative data shows that total imports for January–June reached 31,700 tonnes, a nearly threefold increase from the 8,000 tonnes imported during the same period last year, reflecting a certain degree of resilience in domestic demand. The surge in imports is now an established fact. Behind it lie both the cyclical advantage of domestic demand and prices over overseas markets, as well as traders' strategic moves to establish a foothold ahead of potential exchange listings. Yet regardless of the driving factors, a more practical question emerges — with import volumes climbing to record highs, can importers sustain profitability? Below, we assess the profit margins of imported lithium hydroxide through two pathways: direct resale and carbonation processing. II. Profitability of Direct Resale of Imported Lithium Hydroxide The following profit calculations are based on a comparison between the imported CIF cost (including tariffs, VAT, and port & agency fees) and the domestic SMM battery-grade lithium hydroxide spot price. A phased breakdown is provided below. January–May (First Half) : Import profits were generally substantial, with margins reaching as high as RMB 25,000/tonne or more. During this period, domestic lithium hydroxide prices were on an upward trajectory, while overseas demand remained sluggish and price increases lagged noticeably. Coupled with high overseas inventory levels, foreign holders showed a strong willingness to offload amid the elevated domestic prices, offering certain discounts on actual transactions, which allowed domestic buyers to enjoy margins better than theoretical estimates. June–July : Profitability narrowed significantly. By mid-to-late July, even imports from zero-tariff sources such as South Korea and Australia were hovering around the breakeven point. During this phase, domestic lithium hydroxide prices entered a downward channel, while overseas price declines lagged behind in tandem. At the same time, overseas demand picked up modestly, and holders — having largely cleared their earlier inventories — turned more reluctant to release cargoes, with widespread stockpiling behavior. As a result, the price drop overseas did not keep pace with the decline in China, compressing import margins further toward breakeven. It should also be noted that the above margin calculations implicitly rely on a key assumption: that imported lithium hydroxide can clear customs within a short storage timeframe and be sold at the SMM battery-grade lithium hydroxide (coarse particle) spot price. In practice, however, this assumption may not hold across all scenarios. The realities facing traders when importing lithium hydroxide into the Chinese market are twofold. On the one hand, major domestic cathode material manufacturers have long-standing relationships with leading domestic brands, with well-established supplier qualification systems and process parameters — replacing an imported brand requires a lengthy requalification cycle and faces limited downstream acceptance. On the other hand, lithium hydroxide from different source countries varies in particle size distribution, magnetic material content, and impurity profiles, making it not a straightforward "drop-in" substitute. These factors mean that imported lithium hydroxide often struggles to transact directly at domestic hydroxide spot prices in practice. Instead, it must be sold at a discount — either through an outright price reduction or by pricing reference to the main carbonate futures contract. This implies that actual profits are not as generous as the apparent figures would suggest. III. Profitability of Carbonation Processing of Imported Lithium Hydroxide Core assumptions are as follows: imported material is purchased at a 94%–98% discount to the SMM battery-grade lithium hydroxide spot price, and the carbonation process recovery rate is estimated at 95%–98%. Under these conditions, after the imported lithium hydroxide is carbonated into lithium carbonate, profitable opportunities emerge only in isolated months, with overall margins remaining fairly narrow. Summary Import volumes are growing, and for most of the first half of the year profitable import windows were available (notably in March and May). However, from June onward, apparent profits have narrowed rapidly toward the breakeven point. When further factoring in the discount required for direct resale or the margin compression from carbonation processing, the actual profitability of lithium hydroxide imports in recent months becomes even more limited. For importers aiming to sustain profitability in this space going forward, relying on simple price arbitrage will no longer suffice. Instead, competitive advantages must be built through downstream channel partnerships, quality premiums, and exchange rate risk management. Note: The import margin calculations in this report are based on a specific CIF benchmark. Actual transaction prices may vary by source country, brand, and purchase volume, while discount levels and carbonation costs are market-based estimates and are provided for reference purposes only. Data source: SMM & China Customs

July 31, 2026 - This week, ferrochrome market trading was stagnant and prices fell; the chrome ore market was sluggish, with limited inquiries......

[SMM Molybdenum Analysis: Supply-side supported a strong molybdenum market in July; supply-demand support logic persists in August] SMM July 31 report: In July, China’s molybdenum market maintained a pattern of strong concentrates and weak ferro-molybdenum, with the overall market consolidating at highs. Industry chain profits continued to concentrate upstream. In July, China’s molybdenum concentrates market faced many supply disruptions in China and overseas. Coupled with downstream ferro-molybdenum steel tender volumes strengthening both YoY and MoM, and robust demand, these bullish supply-demand fundamentals drove prices of molybdenum concentrates and ferro-molybdenum to repeatedly hit three-year highs, challenging previous highs.

[SMM Aluminum Downstream Analysis: July Aluminum Processing PMI at 42.2%, All Segments Enter Contraction Territory; End-Use Demand Weakens, Export Divergence Hinders Near-Term Recovery] In July, the aluminum processing industry exhibited a pattern of broad-based off-season weakness across all segments with structural divergence. Only the new energy sector demonstrated demand resilience, while domestic demand in other sectors contracted broadly and significantly. Export performance was uneven, with aluminum wire and cable exports plummeting and dragging down the industry. Combined with raw material constraints, high-temperature production restrictions, and disturbances from price spread recovery, overall industry activity remains deeply mired in contraction territory, and near-term recovery momentum is insufficient.

As of July 28, LME zinc inventories (including off-warrant stocks) had fallen to 119,600 mt, down by approximately 45,000 mt from mid-June. As overseas inventories continued to decline, the LME zinc market structure shifted from contango to backwardation, with the backwardation widening further. By July 28, the LME zinc cash-to-3M spread had strengthened to US$61.09/mt.

[Zinc Ingot Export Window Opening? A Nearly 20-Year Rare Opportunity Reemerges!] As of July 28, LME zinc inventory (including non-registered warrants) had pulled back to 101,800 mt, down about 20,000 mt from mid-June. Amid continued destocking outside China, the LME zinc market structure shifted from contango to backwardation, and the backwardation structure kept widening. On July 28, the LME zinc Cash-3M spread strengthened to $61.09/mt. In stark contrast, zinc consumption in China remained in the traditional off-season, with SMM-reported social inventory of zinc ingots across seven domestic markets holding steady at a high level of around 260,000 mt. The supply-demand patterns in China and overseas clearly diverged, and the SHFE/LME zinc price ratio weakened all the way. Against this backdrop, the long-dormant export window for Chinese zinc ingots reappeared, and discussions in the market about reverse arbitrage involving "buying SHFE zinc, selling LME zinc" noticeably heated up...