[SMM Weekly Magnesium Review: China Magnesium Market Retreats After Rapid Rise; Foreign Trade Remains Sluggish] This week, the magnesium ingot market in the main producing areas retreated after a rapid rise. At the beginning of the week, maintenance provided support to quotations, but downstream high inventory and fear of high prices suppressed transactions. Some producers offered discounts to sell, and magnesium prices weakened under pressure. Tianjin port FOB prices followed the decline of domestic EXW prices passively. Outside China, summer break led to weak demand, and high ocean freight rates suppressed transactions. Dolomite prices remained stable, with limited cost support. Magnesium powder and magnesium alloy followed magnesium ingot by falling first and then stabilizing. Downstream steel mill desulfurization, titanium sponge, and die-casting enterprises entered the off-season, with sluggish transactions. The oversupply pattern remained unchanged. In the short term, the magnesium market is expected to continue moving sideways.

[2026 H1 Silicon Metal Market Review and Outlook: Price Fluctuation Range Narrowed Amid Cost Support and Demand Pressure] Price side: Looking back at H1 2026, affected by low capacity utilization rate of silicon metal, limited demand growth, and silicon metal already trading at relatively low levels, the spot silicon metal price fluctuation range was sharply narrowed under lower-end cost support and upper-end demand pressure. According to SMM price data, the fluctuation range of spot silicon metal prices in 2025 was 38%, while in H1 2026, it narrowed to within 5%. Futures price side, the fluctuation range of the most-traded silicon metal futures contract was 59% in 2025, narrowing to 14% in H1 2026.

[SMM Analysis: 2026 H1 Review and H2 Outlook for Secondary Aluminum Alloy: Resilience Remains, Hidden Concerns Persist] Looking ahead to H2 2026, the secondary aluminum alloy market is expected to continue operating around two main themes: "cost support" and "demand recovery," maintaining an overall pattern of high costs and tight balance.

In H1 2026, the copper rod industry experienced significant divergence amid high copper price fluctuations and limited secondary supply: periodic corrections in copper prices drove a notable YoY rise in copper cathode rod operating rates, while secondary copper output remained constrained by compliance policies, pushing industry operating rates and processing fees into a high-then-low trend. Downstream wire & cable and enamelled wire operating rates were mixed, reflecting differing demand across subsectors. Meanwhile, overseas power infrastructure and the energy transition generated substantial rigid procurement demand, and China’s copper wire rod exports surged, nearly doubling. Looking to H2, high copper prices and overcapacity are expected to persist, widening the gap between copper cathode rod and secondary copper rod. (I) Copper Price Fluctuations and Secondary Supply Shortage Lead to Significant YoY Increase in Copper Cathode Rod Operating Rate in March From the H1 copper cathode price trend, it is clear that the full-year average copper price in 2026 was significantly higher than that in the same period of 2025. Since last year, copper prices have generally drifted higher, and downstream wire and cable enterprises have gradually adapted to high raw material costs, with price acceptance continually increasing. In March this year, copper prices underwent a notable correction. Combined with the prolonged low operating rate of secondary copper rod, market demand was concentrated on copper cathode rod, leading to a concentrated release of purchasing demand that was previously suppressed by high prices. By contrast, in the same period of 2025, copper prices were in a continuous upward channel, and downstream stockpiling willingness was weak. These factors collectively drove the copper cathode rod operating rate in March up by 5.41 percentage points YoY. (II) Compliance constraints suppress secondary copper output, and copper cathode rod operating rate and processing fees rise then fall. Compliance policies for the secondary copper industry continued to be implemented, restricting the circulation of tax-included copper scrap supplies. The price difference between copper cathode and copper scrap swung wildly, and the cost advantages of secondary copper rod disappeared intermittently. Secondary copper capacity could not be fully released; only top-tier compliant enterprises maintained stable production, and operating rates remained low for an extended period. Demand shifted towards copper cathode rod, driving copper rod enterprises’ operating rates to show a high-then-low pattern. From January to March, concentrated downstream stocking by cable and wire companies and the two major power grids kept operating rates above 75%, pushing copper rod processing fees higher YoY. From April to June, copper prices surged again, curbing downstream stocking interest. Copper rod processing fees gradually pulled back from high levels, and the industry average operating rate retreated to the 60%-65% range. Many small and medium-sized processing plants faced insufficient orders and experienced periodic production cuts. (III) Copper Wire and Cable and Enamelled Wire Exhibit Phase-Based Operating Trends, With Clear Divergence in Downstream Demand In H1 2026, both the copper wire and cable and enamelled wire industries experienced an operating pattern of rapid post-Chinese New Year recovery, peaking in the high season, and then pulling back month by month. The monthly operating rate of copper wire and cable recovered from the weekly low during the Chinese New Year to a peak in April, then consolidated and stabilized in May and June, with investment at the start of the power grid’s 15th Five-Year Plan and exports providing core support, while orders from the construction and real estate sectors continued to be a drag. The monthly operating rate of enamelled wire hit its seasonal bottom after the Chinese New Year and surged to the annual high in March, but as home appliance demand weakened more than expected in Q2, the Q2 operating rate declined month by month, with the new energy, industrial motor, and export sectors acting as a floor. Both industries faced the challenges of high copper prices suppressing downstream purchase willingness and pulse-style demand releases causing frequent fluctuations in production schedule pace. (4) Multiple Positive Factors Resonate, H1 2026 Copper Wire Rod Exports Experience Explosive Growth In H1 2026, China’s copper wire rod exports continued their strong growth momentum, emerging as the most outstanding segment in the copper processing industry. In terms of export pace, the first half was characterized by a pattern of “month-on-month climb followed by stabilization at highs.” In Q1, despite the impact of the Chinese New Year holiday, exports maintained consecutive MoM growth. In Q2, driven by the concentrated release of backlog orders and sustained robust overseas demand, monthly exports continued to rise and stayed high. From January to May, China’s cumulative copper wire rod exports reached 134,000 mt, surging 97.93% YoY. Export markets were highly concentrated in Southeast Asia, the Middle East, and South Asia. Countries such as Thailand, Malaysia, Vietnam, and Saudi Arabia, with their power infrastructure upgrades, new energy project construction, and manufacturing relocation, generated rigid import demand for copper wire rod. In terms of trade structure, processing trade with imported materials was the mainstream export model, accounting for over 50%, supplemented by processing trade with supplied materials. Following adjustments to export tax rebate policies, China’s export enterprises have fully shifted to processing trade channels, with related business operating models reaching maturity. (V) High Copper Prices Alongside Overcapacity, with the Landscape of Copper Cathode Rod and Secondary Copper Rod Continuing to Diverge Looking ahead to H2 2026, the copper rod industry is expected to remain in a complex landscape of sustained high copper prices, deepening overcapacity, and continued strong export performance, with the divergence between copper cathode rod and secondary copper rod widening further. Copper cathode rod enterprises are under the dual pressures of elevated raw material costs and insufficient new orders. Prior backlog orders are gradually being delivered and fulfilled, and combined with overseas markets entering a seasonal off-season for consumption, the industry’s operating rate is likely to pull back MoM. However, the core contradiction of overcapacity persists, and overall copper rod processing fees will continue to be in the doldrums. The operating rate on the secondary copper rod side is unlikely to see a sustained uptrend, as the narrowing price difference between copper cathode rod and secondary copper rod has largely eliminated its substitution advantage, with market share continuing to concentrate toward copper cathode rod. Demand continues to shift to copper cathode rod. On the demand side, power grid, new energy, and computing power cables provide stable rigid demand, while demand from real estate and home appliances is weak, limiting overall incremental growth. On the export front, Chinese enterprises continue to develop markets in Southeast Asia and the Middle East, but overseas local capacity expansion and a high base will weigh on subsequent growth rates. Overall, the industry faces multiple contradictions, and the copper cathode rod segment must still rely on expanding both domestic and external demand channels.

1. NEVs: Domestic Sales Growth Under Pressure, Exports Surge In H1 2026, global NEV sales reached approximately 10.25 million units, a cumulative 14% YoY increase; China’s NEV sales totaled about 7.4 million units, up 7% YoY cumulatively, with an average penetration rate of around 48%. While total volume kept growing, the mix of domestic sales and exports diverged markedly. In the Chinese market, domestic sales accounted for about 69% of the total, with cumulative volume falling 14% YoY and the monthly penetration rate peaking at 62%. China’s NEV market has entered a high-base mature stage. The rush to buy ahead of the expected subsidy reduction at the end of 2025 pulled forward some demand that would have occurred in early 2026. Pushing the penetration rate beyond 60% is now encountering considerable headwinds—the remaining internal combustion engine vehicle users are mostly those with limited charging access, rigid long-distance travel needs, or high price sensitivity, making their conversion significantly harder than that of early adopters. Domestic demand is in a transitional phase shifting from policy-driven to market-driven growth. Exports, on the other hand, accounted for about 31% of China’s NEV sales in H1 2026, a sharp jump from 15% in H1 2025, with cumulative volume surging nearly 120% YoY. Three drivers fueled this export surge. First, a low base effect magnified the YoY growth: exports in H1 2025 were artificially suppressed by the EU anti-subsidy probe, creating an unusually low base. Second, automakers rushed to export ahead of tariff implementation, opening a temporary export rush window. Third, Chinese NEVs’ product competitiveness in emerging markets such as Southeast Asia and Latin America continued to improve; coupled with rising fuel vehicle operating costs outside China due to shifting international dynamics, this stimulated the release of overseas NEV demand. From a technology perspective, BEV models accounted for about 66%, basically flat from a year earlier. Beneath this “frozen” share, two opposing forces are at play. On one hand, as NEVs penetrate into lower-tier cities, inadequate charging infrastructure makes plug-in hybrid and extended-range models, which can run on both electricity and fuel, still the most practical choice. On the other hand, the popularization of 4C fast charging technology and the expansion of ultra-fast charging networks are gradually addressing the range anxiety weakness of BEVs, building momentum for a rebound in their market share. I. Vehicle Battery Capacity, from January to May the average capacity reached 68.4 kWh, up 34% YoY. The growth drivers were concentrated in three aspects: first, consumption structure upgrades, with the trade-in policy steering demand from A00/A0 to B- and C-class models—larger models carry higher-capacity batteries, and this structural effect lifted the overall average; second, the battery capacity of plug-in hybrid and extended-range models continued to expand, with all-electric driving range rising from 50–80 km to 150–250 km and corresponding battery capacity roughly doubling from 8–18 kWh to 18–40 kWh, while extended-range models grew to over 50 kWh; third, the share of commercial vehicles increased, and the vehicle battery capacity of heavy trucks and logistics vehicles generally exceeded 200 kWh, exerting a notable leverage effect on the overall average. 2. Power Battery Installations: Growth Shift, Bottoming Out in Q2 In H1 2026, China's power battery installations are estimated at around 340 GWh, up 10% YoY. Q1 was dragged by soft domestic sales and subsidy phase-out, keeping growth sluggish; Q2 saw a month-on-month recovery, with May installations reaching 71.9 GWh, a new high for the year, signaling a gradual repair in end-use demand. In the global market, H1 installations are estimated at about 580 GWh, up roughly 15% YoY, with incremental volume outside China mainly coming from the acceleration of electrification in Europe and continued ramp-up in emerging markets such as Southeast Asia and Latin America. Notably, growth outside China has outpaced the Chinese market—Q1 installations outside China reached 117.4 GWh, up 17.4% YoY, and the combined market share of Chinese enterprises in markets outside China rose to 52%. A shift in growth driver—where the Chinese market downshifts and markets outside China take over—is becoming a new feature of the industry’s growth structure. 3. Power Battery Cell Production: Strengthened LFP Dominance and Analysis of the Gap Between Production and Installations In H1 2026, China's total power battery production was about 790 GWh, with cumulative YoY growth of 43%; global power battery cell production totaled about 860 GWh, with cumulative YoY growth of 31%. In the Chinese market, LFP power battery cell share rose to 76% from 66% in the same period of 2025, with production up 64% YoY; ternary power battery cell share was around 24%, basically flat YoY. LFP’s share rose from 66% to 76%, driven by three key factors. First, the electrification ramp-up of commercial vehicles provided the most direct incremental contribution. Commercial vehicles almost entirely adopted the LFP route; heavy trucks, logistics vehicles, and buses place far higher demands on cost and safety than on energy density. The structural growth in commercial vehicle installations directly boosted LFP’s overall share. Second, the penetration rate of LFP in the passenger car segment continued to rise on its own. Extended-range and plug-in hybrid models naturally favor the LFP route, while the maturation of 4C fast-charging LFP solutions effectively addressed the range anxiety shortcoming, further squeezing the market space for mid-end ternary batteries. Third, the explosion in energy storage demand created a siphoning effect on LFP production lines. LFP production lines can flexibly switch between EV and ESS, and the high growth in energy storage orders drove LFP line operating rates significantly higher than those of ternary lines. Strengthened economies of scale further lowered costs, forming a positive feedback loop. There was a notable growth gap between power battery cell production (790 GWh, +43%) and installations (approximately 340 GWh, +10%), but this did not stem from inflated demand. Rather, it resulted from the combined effect of the following factors: First, export diversion—about 30% of production flowed to markets outside China either as complete vehicle exports or direct battery cell exports, and was not included in domestic installation statistics. Second, timing mismatch—some battery cells whose production schedules were accelerated in Q2 were still in inventory or in transit and are expected to translate into installations in H2. In addition, after the destocking cycle in H2 2025, battery cell manufacturers’ finished product inventory cycle was compressed from 2 months to 1.3 months, and there was active restocking in H1 2026. Overall, the high production growth reflected the buoyancy of battery enterprises’ production activity, while the slower installation growth was more affected by export diversion and inventory cycle disruptions. The gap between the two does not represent a substantive deterioration in the supply-demand relationship. 4. Cost Changes In H1 2026, prices of key raw materials for power battery cells rose overall. Unlike the previous cycle of soaring lithium prices, top-tier players’ cost control methods during this price rise were more diverse. As lithium carbonate futures trading matured, battery and cathode material enterprises hedged to lock in procurement costs ahead of time, effectively offsetting spot price fluctuations. Some long-term contract orders adopted formula pricing, allowing for smoother price transmission. Coupled with the ongoing large-scale centralized procurement of auxiliary materials and technological cost reductions, the increase in cost per Wh for mainstream battery cell enterprises remained generally manageable. However, as the industry was still in a price war, involution kept the overall gross margin of the industry at a relatively low level. H2 Outlook Looking ahead to H2 2026, the power battery cell industry is expected to sustain the growth momentum seen in H1, as recovering domestic demand and strong export performance reinforce each other, with the full-year trajectory trending lower in H1 and higher in H2. Sales side, the auto market is likely to stabilize in Q3, followed by the traditional peak season in Q4. Alongside the gradual absorption of the pull-forward effect from 2025, the decline in domestic sales is expected to continue narrowing. On the export front, although tariff policy uncertainty persists, the product competitiveness of Chinese NEVs in markets outside China has become entrenched. Demand in emerging markets such as Southeast Asia, Latin America, and the Middle East continues to accelerate, and proactive restocking by overseas dealers points to a high probability that strong export growth will persist in H2. Installations side, although the growth rate has come down significantly from 2025 levels, absolute incremental volume remains substantial, supported by both rising vehicle battery capacity and the ramp-up of commercial vehicle volumes. H2 installations are projected to rebound markedly from H1, and the structure—passenger vehicles providing the base and commercial vehicles contributing incremental elasticity—will remain unchanged. Notably, the inventory buffer built up from production significantly outpacing installations in H1 will gradually flow into installations in H2, offering additional support to H2 data. Overall, the power battery cell industry in 2026 has left behind the era of systemic growth dividends and officially entered a phase of deep divergence. Sustained high export growth opens new growth avenues for Chinese battery enterprises, but the decisive factor in the second half of the competition will be whether they can truly seize the window of opportunity in overseas markets and secure a firm foothold in the global supply chain.

"The heatwave has significantly driven sales growth, especially the PortaSplit air conditioner, which has sold out in some sales channels."