In H1 2026, Shanghai aluminum prices followed a high-first-then-low trajectory. In Q1, a mix of market expectations for Federal Reserve rate cuts and geopolitical tensions in the Middle East drove aluminum prices to multi-year highs. Entering Q2, confirmation of the US strong-dollar policy stance, easing supply disruptions in the Middle East, and a seasonal lull in domestic downstream consumption combined to push the aluminum price center downward continuously. Looking ahead to H2, persistent strong US dollar sentiment and overseas liquidity concerns will cap non-ferrous metal valuations. On the supply side, elevated aluminum prices have incentivized higher production releases; domestic operating capacity is projected to rise month-on-month, while newly commissioned capacity in the Middle East and Indonesia will ramp up output gradually. On the demand side, domestic consumption recovery is set to remain modest. Existing export order backlogs will still prop up aluminum semi-finished product shipments, yet market expectations for new export orders have softened. All told, Shanghai aluminum’s price center is likely to slide further in H2, delivering a full-year high-first-then-low price pattern. 1. H1 2026 Shanghai Aluminum Price Review by Stage 1.1 Q1: Macroeconomics & Geopolitics Dominate, Aluminum Prices Surge Then Consolidate Shanghai aluminum prices in Q1 2026 were primarily dictated by macro sentiment and overseas supply disruptions, with seasonally weak fundamentals taking a backseat. January: Rate Cut Expectations & Capital Inflows Fuel Price Rally Fundamentals: A seasonal lull ahead of the Lunar New Year created demand weakness, leading to a continuous build-up of social aluminum ingot inventories. By late January, SMM-tracked social inventories hit 782,000 tonnes, the highest level for the period in three years. Sustained high aluminum margins squeezed profit margins for downstream processors, dampening their willingness to operate and curbing primary aluminum purchasing activity. Macroeconomics: Markets priced in an impending Fed rate-cut cycle, sending the US Dollar Index sharply lower and drawing heavy speculative capital into commodity futures. Complementary pro-consumption policies rolled out domestically further underpinned aluminum prices. SMM’s average A00 aluminum price stood at RMB 24,086/tonne in January, the highest monthly average in H1. February: Cooling Rate-Cut Hopes Trigger Range-Bound Weakness Fundamentals: Lunar New Year holidays triggered a sharp collapse in downstream procurement, while smelters ramped up ingot casting, pushing social inventories even higher. Post-holiday SMM social inventories climbed to 1.108 million tonnes, with bloated stock levels failing to provide upward price support. Macroeconomics: Dimming Fed rate-cut bets lifted the US Dollar Index, prompting profit-taking liquidation that dragged aluminum prices lower and locked the market into weak consolidation. The average SMM A00 aluminum price retreated to RMB 23,385/tonne in February, down roughly RMB 700 month-on-month. March: Alternating Middle East Supply Risks & Demand Drags Intensify Volatility March trading centered on alternating forces of Middle East supply disruptions and demand-side headwinds, amplifying long-short volatility and driving aluminum prices through a pattern of rally-correction-rebound. Supply-side developments saw widespread overseas production curtailments: Mozal entered maintenance; Qatalum maintained a 60% operating rate and ruled out further output reductions; Alba shut down Lines 1, 2 and 3 with additional cutbacks rumoured; major damage to EGA facilities stoked fears of large-scale production suspensions. SMM estimates tally nearly 4 million tonnes of overseas primary aluminum capacity subject to cuts, including Mozambique’s smelter. Worries over contracting overseas supply became the core catalyst for periodic price rallies. Geopolitical risks: Escalating conflict in the Middle East raised widespread market concerns over shipping security in the Strait of Hormuz, embedding persistent geopolitical risk premiums into aluminum valuations. Demand-side headwinds: Mounting stagflation fears lifted risk aversion; lofty aluminum prices deterred downstream buying, while surging energy and freight costs crushed processor profitability and restrained demand recovery. SMM’s average A00 aluminum price rebounded to RMB 24,386/tonne in March, the second-highest monthly average in H1, alongside markedly wider price swings. 1.2 Q2: Expanding Supply & Marginal Demand Weakness Push Price Center Lower In Q2, high aluminum prices lifted domestic capacity utilization, while the market gradually priced in the impacts of overseas smelter cutbacks, shifting focus back to domestic fundamentals. Shanghai aluminum’s average price fell from roughly RMB 24,665/tonne in April to RMB 23,769/tonne in June, with prices dipping to an intra-year low of RMB 22,665/tonne in late June. Supply side: Strong prices encouraged primary aluminum smelters to boost operating rates and lift domestic output. The market gradually absorbed the impact of cutbacks in Mozambique and the Middle East, weakening the Shanghai-LME aluminum price ratio. Between June and July, rumours circulated that curtailed Middle East capacity would resume production, coupled with sequential commissioning of new Indonesian smelters, amplifying expectations of rising overseas supply. Industry communications indicate domestic primary aluminum output rose approximately 3.5% year-on-year over the first five months. Demand side: Elevated aluminum prices weighed on domestic end-user consumption, yet a stronger LME premium relative to Shanghai aluminum boosted semi-finished aluminum exports, offsetting weak domestic primary aluminum offtake. General Administration of Customs data records cumulative exports of unwrought aluminum and semi-finished products at 2.685 million tonnes in Jan-May, up 10.4% YoY. April single-month exports hit 598,000 tonnes, a one-year-plus high, followed by May shipments of 632,000 tonnes, up 15.5% YoY. Robust export volumes effectively filled the gap left by muted domestic consumption. Inventory side: Q2 delivered a pronounced destocking cycle. Social inventories peaked at 1.465 million tonnes in early May before falling to 1.165 million tonnes by end-June, a total drawdown of around 300,000 tonnes with an accelerated destocking pace. Weekly inventory drawdowns once surged to 170,000 tonnes, a four-year high for single-week de-stocking volumes. 2. Fundamental Supply & Demand Analysis 2.1 Supply: High Smelting Margins Boost Operating Rates, New Capacity Ramp-Ups Keep H1 Supply Ample Persistently robust smelting profitability in H1 2026 significantly expanded production flexibility, acting as the core driver of loose supply conditions through the first half. On one hand, sustained aluminum price strength maintained healthy per-tonne margins, maximizing smelters’ production incentives. On the other hand, new projects commissioned from late 2025 through H1 2026 entered sequential ramp-up phases, delivering steady monthly output increments. Continuous volume growth from newly commissioned capacity further lifted domestic primary aluminum production. The combined effects drove steady gains in national primary aluminum output, resulting in abundant raw material supply across the market. 2.2 Demand: Muted Domestic Consumption, Exports Act as Key Support Domestic primary aluminum demand in H1 2026 displayed a clear divergence: soft domestic offtake offset by buoyant external demand. Persistently high aluminum prices suppressed downstream purchasing, yet semi-finished aluminum exports benefited from favourable cross-market price differentials and delivered standout performance. General Administration of Customs data shows China exported 1.435 million tonnes of aluminum semi-finished products in Jan-May 2026, up 13.7% YoY, with May single-month exports reaching 320,000 tonnes (+14.7% YoY). Elevated export volumes over the first five months created a vital outlet for domestic primary aluminum digestions. The core driver behind export strength was the LME-over-Shanghai price spread: overseas markets faced tight supply expectations stemming from Middle East production cuts, while bloated domestic inventories depressed Shanghai aluminum, creating lucrative profit windows for semi-finished aluminum exporters. 2.3 Inventories: H1 Inventory Build to Multi-Year Highs Followed by Rapid Q2 Destocking Domestic social primary aluminum inventories traversed three distinct phases in H1 2026: rapid accumulation, consolidation at elevated levels, then steep destocking. Early-year seasonal weakness ahead of the Lunar New Year combined with high aluminum prices curbing demand drove continuous inventory builds, which peaked at a multi-year high of 1.465 million tonnes in early May. Subsequent downstream post-holiday restocking and surging export shipments triggered accelerated inventory drawdowns through Q2. The sharp destocking rate stemmed from concentrated export deliveries paired with a wave of downstream replenishment demand. 3. H2 2026 Outlook 3.1 Macroeconomics: Strong US Dollar Caps Metal Valuations The US will maintain its strong-dollar policy stance, keeping the US Dollar Index elevated and capping valuation upside across non-ferrous metals. Middle Eastern geopolitical risk premiums will gradually fade amid improved shipping outlook for the Strait of Hormuz and easing overseas liquidity jitters, creating long-term bearish pressure on aluminum prices. 3.2 Supply: Overseas Capacity Resumptions & New Commissioning Run Parallel Overseas market developments include incremental production restarts across Middle Eastern smelters, alongside faster ramp-up schedules for newly commissioned overseas capacity. 3.3 Demand: Weakening Support from Export Orders Short-term backlogged orders will continue to underpin semi-finished aluminum export volumes, yet narrowing cross-market price spreads have softened market expectations for new export order intake, pointing to downside risks for export growth over the medium-to-long term. Market participants will closely monitor domestic seasonal peak consumption trends and overseas new order placement momentum. 4. Comprehensive Market Assessment All factors considered, the Shanghai aluminum market will face dual headwinds of macro valuation pressure and expanding supply volumes throughout H2 2026.

SMM, July 7: In the first half of 2026, geopolitical conflicts in the Middle East emerged as one of the decisive factors affecting electrolytic aluminum prices. Prior to the Middle East events, expectations of a US dollar rate-cut cycle were bullish for non-ferrous metal prices, and overseas electrolytic aluminum prices generally maintained a firm trend in January. However, high aluminum prices suppressed demand, compounded by the impact of the domestic Spring Festival holiday, leading to larger-than-expected domestic aluminum ingot inventory accumulation. In February, domestic and overseas aluminum prices fell in tandem. On February 28, the US-Israel coalition launched a military strike against Iran, officially marking the beginning of the Middle East geopolitical conflict's impact on aluminum prices. Middle East Geopolitical Conflict Triggers Production Cuts; Supply Gap Expectations Drive Up LME Aluminum Prices Affected by the US-Iran conflict, some aluminum smelters in the Middle East experienced production cuts. Combined with the Mozambique aluminum smelter entering shutdown in March, the market expected overseas electrolytic aluminum fundamentals to face a significant supply gap. Boosted by this, overseas aluminum prices continued to climb, with the LME 3M aluminum price reaching a near three-year high of $3,787.5/tonne on June 2. The timeline of production cuts at Middle East and Mozambique aluminum smelters is as follows. In addition, power and other infrastructure in Iran was damaged, making it difficult for local aluminum smelters to sustain production. However, with no official announcements yet, SMM has made its own production cut assessment. As of mid-April, SMM estimated that the total capacity affected by production cuts in the Middle East and Mozambique could reach approximately 3.5–4.0 million tonnes. Under the impact of significant production cuts, overseas electrolytic aluminum fundamentals shifted to a deficit, with total LME aluminum ingot inventory and Japanese port aluminum ingot inventory continuing to decline. As of end-June 2026, LME global aluminum ingot inventory stood at 302,000 tonnes, down 207,000 tonnes from end-2025. As of end-May, Japanese major port electrolytic aluminum inventory was 239,000 tonnes, down 78,000 tonnes from end-2025. Amid expectations of supply tightening, ex-China aluminum premiums strengthened. As of end-June, SMM Japan MJP aluminum ingot spot premium recorded $380/mt, up 123.5% from the end of last year, and SMM Japan Q3 MJP aluminum ingot premium recorded $395/mt, up $309/mt from Q4 2025, a jump of 359.3%. SMM Europe P1020A aluminum ingot duty-paid price recorded $547.5/mt, up 62.2% from the end of last year, while SMM Europe P1020A aluminum ingot duty-unpaid price recorded $470/mt, up 64.9% YoY. SMM US Midwest DDP aluminum premium recorded 110.5¢/lb, equivalent to around $2,435/mt, up 18.2% from the start of the year, an absolute increase of approximately $374.7/mt. Although supply tightened and aluminum ingot destocking took place, downstream purchasing enthusiasm was subdued by high prices, with actual transactions in Asia persistently at a discount to the Japan MJP aluminum ingot premium. Indonesia saw a concentration of new project startups; as new projects continued to ramp up production, supply increased, and since Q2, Indonesia aluminum ingot FOB prices showed a trend of pulling back slightly. As of end-June, SMM FOB Indonesia P0610A average price recorded $270/mt, up 92.9% from the end of last year, but down 8.8% from this year's high of $296/mt. SMM FOB Indonesia P1020A average price recorded $266/mt, up 97.0% YoY, but down 8.6% from this year's high of $291/mt. Aluminum premiums in other regions maintained an overall uptrend. As of end-June, SMM CIF South Korea P1020A average price recorded $342/mt, up 132.7% from the end of last year; SMM FCA South Korea P1020A average price recorded $362/mt, up 119.4% YoY; and SMM CIF Thailand P1020A average price recorded $328/mt, up 120.9% YoY. High Profits Accelerate Electrolytic Aluminum Restarts and New Project Commissioning Under high aluminum prices, electrolytic aluminum companies enjoyed substantial profits. These high profits stimulated some idled capacity to accelerate restarts and also catalyzed more new electrolytic aluminum projects, accelerating their commissioning. In the first half of the year, three electrolytic aluminum smelters resumed idled capacity to varying degrees, and two additional smelters announced plans to restart production in 2026. Details are as follows: San Ciprián smelter in Spain safely completed restart on April 8, with total capacity of approximately 230,000 tonnes/year, representing an increase of approximately 150,000–200,000 tonnes/year compared to 2025 operating capacity. Mount Holly in the United States began restart in April, with plans to reach full capacity by end-June, involving 50,000 tonnes/year of capacity. Grundartangi smelter in Iceland began restart in April, expected to complete restart by end-July, involving 210,000 tonnes/year of capacity. Magnitude 7 Metals planned to restart potline No. 1 cells at its New Madrid aluminum smelter in the United States, with plans to add 75,000 tonnes/year of primary aluminum capacity by end-2026. Norsk Hydro indicated that the Slovalco smelter in Slovakia planned to restart partial primary aluminum production in Q4 2026, involving 75,000 tonnes/year of capacity. Regarding new projects, according to SMM estimates, total planned commissioning capacity for overseas electrolytic aluminum in 2026 is approximately 2.3 million tonnes, of which approximately 700,000 tonnes have been commissioned, with the remaining 1.6 million tonnes expected to be commissioned in the second half of 2026. For details, please follow the "SMM Overseas Electrolytic Aluminum Project Monthly Review" series. Overall, although the Middle East and Mozambique experienced large-scale production cuts in the first half of the year, the acceleration of restarts and new project commissioning partially offset the supply reduction. According to SMM estimates, total overseas electrolytic aluminum production in H1 2026 was 14.397 million tonnes, down 4.1% year-on-year, and total overseas demand was 13.612 million tonnes, down 3.1% year-on-year. Since overseas electrolytic aluminum had a net inflow of approximately 1.234 million tonnes into the domestic market in H1, the overseas electrolytic aluminum deficit in H1 is estimated at approximately 450,000 tonnes. H2 Outlook: Middle East Restarts Combined with New Project Ramp-up Increase Supply, Putting Pressure on Aluminum Prices In June–July, the Middle East geopolitical situation showed no clear signals of further deterioration, and news of restarts emerged from Middle East aluminum smelters that had undergone production cuts. On July 2, EGA announced that its Al Taweelah plant had made progress in restart efforts: anode removal work for all electrolytic cells had been completed; cell cleaning was approximately 90% complete; and over 20% of solidified aluminum blocks inside cells had been cleared. On May 26, the first electrolytic cell was successfully restarted; as of July 2, 89 cells were in operation (out of a total of 1,262 cells), equivalent to approximately 110,000 tonnes of capacity. In addition, Aluminum Bahrain and Qatalum were also expected to gradually begin restarts. With Middle East restarts combined with continued ramp-up of new projects, the global electrolytic aluminum balance is expected to shift toward a surplus by Q4 2026.

SMM, July 7: In H1 2026, the Middle East geopolitical conflict became one of the decisive factors affecting aluminum prices. Before the Middle East conflict, expectations of a US dollar interest rate cut cycle were bullish for non-ferrous metal prices. In January, aluminum outside China generally held up well. High aluminum prices suppressed demand, and combined with the impact of the Chinese New Year holiday in China, domestic aluminum ingot inventory buildup exceeded expectations. In February, aluminum prices both in and outside China pulled back in tandem. On February 28, the US-Israeli coalition launched a joint military strike on Iran, officially kicking off the impact of the Middle East geopolitical conflict on aluminum prices. The Middle East geopolitical conflict triggered production cuts in the Middle East, and expectations of a large supply deficit pushed up LME aluminum prices. Affected by the US-Iran conflict, some aluminum plants in the Middle East cut production, and combined with the Mozambique aluminum plant entering a shutdown in March, the market expected that the overseas aluminum market would face a large fundamental deficit. Boosted by this, overseas aluminum prices climbed continuously, with the LME 3M aluminum price reaching a near three-year high of $3,787.5/mt on June 2. The timeline of production cuts at Middle Eastern and Mozambique aluminum plants is as follows: In addition, Iran's domestic power and other infrastructure were damaged, and aluminum plant production is expected to be unsustainable. However, there is no clear announcement at present, and SMM has made an assessment of production cuts. As of mid-April, SMM estimated that the total capacity affected by production cuts in the Middle East and Mozambique could reach around 3.5-4 million mt. Under the impact of significant production cuts, the overseas aluminum market shifted to a deficit, with total LME aluminum ingot inventory and Japanese port aluminum ingot inventory declining continuously. As of the end of June 2026, LME global aluminum ingot inventory registered 302,000 mt, down 207,000 mt from the end of last year. As of end-May, primary aluminum inventory at major Japanese ports stood at 239,000 mt, destocking by 78,000 mt from the end of last year. Amid expectations of supply tightening, regional premiums for overseas aluminum strengthened. As of end-June, SMM Japan MJP aluminum ingot spot premium registered $380/mt, up 123.5% from the end of last year; SMM Japan Q3 MJP aluminum ingot premium registered $395/mt, up $309/mt from Q4 2025, an increase of 359.3%. SMM Europe P1020A aluminum ingot duty-paid premium registered $547.5/mt, up 62.2% from the end of last year; SMM Europe P1020A aluminum ingot duty-unpaid premium registered $470/mt, up 64.9% from the end of last year. SMM US Midwest DDP aluminum premium registered 110.5¢/lb, equivalent to around $2,435/mt, up 18.2% from the start of the year, with an absolute increase of approximately $374.7/mt. Although supply tightened and aluminum ingot destocking occurred, high prices dampened downstream purchase enthusiasm, and actual transactions in Asia were continuously at a discount to the Japan QMJP aluminum ingot premium. New investments in Indonesia were concentrated, and as new projects continued to ramp up production, supply increased. From Q2, Indonesia aluminum ingot FOB prices showed a slight pullback trend. As of end-June, the average SMM FOB Indonesia P0610A price stood at $270/mt, up 92.9% from the end of last year but down 8.8% from this year’s high of $296/mt; the average SMM FOB Indonesia P1020A price stood at $266/mt, up 97.0% from the end of last year but down 8.6% from this year’s high of $291/mt. In other regions, aluminum premiums maintained an overall uptrend. As of end-June, the average SMM CIF South Korea P1020A price stood at $342/mt, up 132.7% from the end of last year; the average SMM FCA South Korea P1020A price stood at $362/mt, up 119.4% YoY; the average SMM CIF Thailand P1020A price stood at $328/mt, up 120.9% YoY. High Profits Accelerate Aluminum Production Resumptions and New Project Startups Under high aluminum prices, aluminum enterprises enjoyed considerable profits. These high profits stimulated some idled capacity to accelerate production resumptions and also gave rise to more new aluminum projects, speeding up their startup. In H1, three aluminum smelters restored idle capacity to varying degrees, while another two aluminum smelters announced plans to resume production in 2026. Details are as follows: Spain’s San Ciprián smelter safely completed its restart on April 8, with a total capacity of approximately 230,000 mt/year, representing an increase of about 150,000-200,000 mt/year compared to its 2025 operating capacity. Mount Holly in the US began production resumptions in April and plans to reach full capacity by end-June, involving 50,000 mt/year of capacity. Iceland’s Grundartangi smelter started resuming production in April and is expected to complete the process by end-July, involving 210,000 mt/year of capacity. Magnitude 7 Metals plans to restart potline 1 at the New Madrid aluminum smelter in the US, aiming to add 75,000 mt/year of primary aluminum capacity by the end of 2026. Norway’s Hydro stated that the Slovalco smelter in Slovakia plans to restart part of its primary aluminum production in Q4 2026, involving 75,000 mt/year of capacity. For new projects, according to SMM estimates, total planned new aluminum capacity outside China in 2026 is about 2.3 million mt, of which approximately 700,000 mt has already been commissioned, and the remaining 1.6 million mt is expected to be commissioned in H2 2026. More details can be followed in the “SMM Monthly Review of Aluminum Projects Outside China” series. In summary, although the Middle East and Mozambique experienced large-scale production cuts in H1, the acceleration of production resumptions and newly commissioned projects partly offset the supply reduction. According to SMM calculations, total aluminum production outside China in H1 2026 was 14.397 million mt, down 4.1% YoY, and total demand outside China was 13.612 million mt, down 3.1% YoY . As 1.234 million mt of aluminum from outside China is expected to have net inflows into China in H1, overall, the aluminum deficit outside China in H1 is estimated at around 450,000 mt . H2 Outlook: Production resumptions in the Middle East combined with the ramp-up of newly commissioned projects will increase supply and put pressure on aluminum prices. In June-July, as the geopolitical situation in the Middle East showed no clear signs of further deterioration, aluminum smelters in the region that had cut or suspended production began to report resumptions. On July 2, EGA announced progress in the resumption of operations at its Al Taweelah plant. The removal of anodes from all pots has been completed; pot shell cleaning is about 90% complete; and over 20% of the solidified aluminum blocks in the pots have been cleared. On May 26, the first pot was successfully restarted; as of July 2, 89 pots were in operation (out of a total of 1,262 pots), equivalent to a capacity of approximately 110,000 mt. In addition, Alba and Qatalum are also expected to gradually resume production. With production resumptions in the Middle East and the ongoing ramp-up of newly commissioned projects, the global aluminum balance is expected to shift to a surplus in Q4 2026. [Data Source Statement: All data beyond publicly available information is derived by SMM based on public information, market communication, and SMM's internal database models, and is for reference only, not constituting any decision-making advice.] Data source: SMM (Guo Mingxin 021-20707919)

Every major aluminum player made a rational bet in H1 2026, Indonesia's smelter wave, the US's Inola project, India's Adani-IHC deal, Alcoa's South32 buy, the Gulf's post-strike rebuild, none of it needing the Middle East war to justify itself, though the war's price spike (LME to $3,546, premiums to multi-year highs) accelerated all of it at once.

Qatar Aluminium Manufacturing Company (Qamco) confirmed on Sunday that it has terminated its marketing agency relationship with its partner, Norway's Hydro, in their joint venture, Qatalum. The company did not specify the reason. "Following the termination of the partnership, Qatar Aluminium will temporarily assume responsibility for the marketing and sales of its aluminum products," Qatalum said in a statement. It added that the company will continue constructive communication with Hydro to ensure an orderly transition. It is reported on Friday that Qatar Aluminium cancelled its metal supply agreement with Hydro; Hydro issued a force majeure notice to its customers. Qatalum, established in 2006, has an annual production capacity of 648,000 tons and is a 50/50 joint venture between Hydro and Qatar Energy; Qatar Energy holds a 51% stake in Qamco.

[Geopolitical Disruptions Combined with Supply-Demand Resonance, Aluminum Prices Hold Up Well at Highs] Overall, from a macro perspective, risks of Middle East conflicts persist, resonating with fundamental supply-side hard damage and low global inventory to jointly provide strong bottom support for aluminum prices. However, weak interest rate cut expectations, China's aluminum ingot inventory buildup exceeding expectations, and the adverse expectations on consumption and inflation from recent high fluctuations in oil prices have all notably weighed on the upside room for aluminum prices. In the short term, aluminum prices fluctuate at highs.