\LME aluminium prices have retreated steadily from their late-May peak, falling from nearly $3,680 per metric ton to around $3,480 per metric ton. More notably, the LME aluminium Cash-3M spread narrowed sharply over just one week, dropping from a cash premium of $104.56 per metric ton on June 1 to $15.17 per metric ton on June 9, a loss of nearly $90 per metric ton. This marks the steepest contraction in the backwardation structure since the outbreak of the Middle East conflict.

[Price Review] This week (6.8-6.11), silver extended its accelerated decline, with both international and domestic futures markets plunging sharply in tandem. The price center moved notably lower WoW, hitting a new low in nearly two months. The non-farm payrolls data triggered the first heavy sell-off: on June 5, the US May non-farm payrolls report showed an increase of 172,000 jobs, far exceeding the market expectation of 85,000; data for the prior two months were revised up by a combined 93,000, and the unemployment rate held at a historic low of 4.3%. Following the release, market expectations for US Fed rate hikes surged sharply, and silver immediately suffered a heavy blow. On June 10, the US May CPI data came out, up 4.2% YoY and 0.5% MoM. The inflation data further cemented market expectations that the US Fed would maintain high interest rates. Paired with renewed deterioration in the US-Iran conflict, with US forces striking Iran for two consecutive days, the US Fed was expected to have difficulty releasing dovish signals in the near term. Industrial demand side, the premium of standard silver ingots against TD mainstream quotations in the Shanghai market continued to rise WoW; mainstream quotations were generally at parity or with slight premiums, and most transactions settled in the range from parity against SGE TD to a premium of 10 yuan/kg. As silver prices plunged during the week, downstream inquiry activity was relatively active. Inventory side, downstream consumption recovered somewhat WoW, and some smelters showed lower willingness to sell due to falling prices, so social inventory of silver ingots in Shanghai and Shenzhen destocked overall. Gold/silver ratio side, as of June 10, the LBMA gold/silver ratio widened from 63.8 a week ago to 67.2, highlighting silver's greater weakness relative to gold under sustained macro pressure. [Important Data] Bearish US May non-farm payrolls rose by 172,000, far exceeding expectations, with labor market resilience surprising to the upside. US May CPI up 4.2% YoY, a three-year high, as inflationary pressures re-emerged. After taking office as Fed Chairman, Warsh set a clear hawkish tone, and subsequent official remarks continued to send tightening signals. India's silver import control policy remained in place, weighing on physical consumption demand. Bullish: Peru's energy crisis persisted, with a national state of emergency until year-end; 12 large mines have already implemented staggered production, and May silver output is expected to decline by 5%–8%. The global supply-demand gap remains, providing some floor support for silver prices. [What to Watch] June 16-17: US Fed June FOMC meeting and Warsh post-meeting press conference (key event) June 18: US May retail sales data June 20: University of Michigan preliminary June consumer sentiment index Key focus: Fed official speeches, latest developments in US-Iran negotiations. [Price Forecast] Silver is expected to maintain a pattern of hovering at lows and seeking a bottom next week, remaining under an overall high macro pressure environment. The Fed's FOMC meeting from June 16 to 17 will be the core focus next week, with the market closely watching Wash's speech content and the Fed's latest guidance on the interest rate path. If the Fed releases a clear signal of rate hikes, silver prices may dip further; if the meeting outcome leans dovish, silver prices could see a rebound from oversold conditions. On the domestic fundamentals side, downstream purchases have slightly recovered, pressure from spot selling at lows in the market has eased somewhat, and the social inventory of spot silver ingots is destocking overall. Since most enterprises remain cautious amid heavy fear of price declines, mainstream traded spot premiums are expected to remain in a range of parity to a 10 yuan/kg premium over SGE TD, and the market is unlikely to quickly shift to higher premiums in the near term.

Refined Cobalt: This week, refined cobalt spot prices continued to decline under pressure. Supply side, mainstream smelters kept EXW prices at 422,000 yuan/mt; after the rapid price drop, most traders suspended quotations, with only a few hedgers selling small volumes at a small premium to futures. Demand side, the continued downturn dampened downstream buying interest, and alloy and magnetic material enterprises, with a "rush to buy amid continuous price rise and hold back amid price downturn" mentality, mostly postponed purchases and remained on the sidelines. This week's price decline was driven by two factors: first, mid-week, an overseas price reporting platform sharply cut the low-end price of cobalt intermediate products, weakening market sentiment and dragging down refined cobalt prices; second, as a result, some funds were forced to cut losses and exit, further exacerbating the price pullback. In the short term, the market is likely to remain in a volatile and pressured state, and the stabilization of refined cobalt prices still depends on the return to stability of other cobalt products, especially cobalt salt prices. Cobalt Intermediate Products: This week, cobalt intermediate product prices edged lower. Supply side, mainstream miners and traders kept their quotations in the range of $25.5-26/lb; a small number of low-quality cargoes were traded below $25/lb during the week, but due to significant quality discounts and limited volumes, the impact on mainstream prices was relatively small. In terms of shipments, Q1 2026 quota approvals remained slow due to procedural complexity, and combined with tight logistics in the DRC and low priority for cobalt raw material shipments, the arrival of large volumes was further delayed. Current estimates suggest bulk arrivals may take place around August. In the short term, demand-side support remained weak, and prices may largely move sideways. For the market to stabilize and strengthen subsequently, it still depends on the recovery of downstream demand and the restoration of cobalt salt prices. Cobalt Sulphate: This week, cobalt sulphate trading was sluggish, with a continued tug-of-war between upstream and downstream, and prices held steady overall. Supply side, mainstream smelters continued to hold prices firm, with the quotation range maintained at 88,000-92,000 yuan/mt; some recycling smelters and traders, pressured by liquidity needs, lowered offers for small volumes to 84,000-85,000 yuan/mt. Demand side, the persistent price decline dampened downstream buying interest, and some enterprises indicated purchase intentions of only 81,000-82,000 yuan/mt, but the gap with sellers' offers was large, making actual transactions difficult. In the short term, cobalt sulphate prices are likely to remain in the doldrums, and a stabilization and recovery of the market still depends on the material release of concentrated restocking demand from downstream. SMM New Energy Research Team Wang Cong 021-51666838 Ma Rui 021-51595780 Feng Disheng 021-51666714 Lv Yanlin 021-20707875 Xiao Wenhao 021-51666872 Zhang Haohan 021-51666752 Wang Zihan 021-51666914 Wang Jie 021-51595902 Xu Yang 021-51666760 Yang Lianting 021-51595835 Wang Zhaoyu 021-51666827

As of this Thursday, SMM battery-grade nickel sulphate average price declined slightly. Demand side, the regular procurement period passed, coupled with the approaching semi-annual reports, downstream purchasing sentiment was overall weak, and acceptance of nickel salt prices was low; supply side, due to MHP payables and auxiliary material prices still staying at high levels, some producers had high spot costs, and nickel salt offers still stayed high. However, with nickel prices falling significantly, overall cost pressure improved somewhat. Looking ahead, the expectation of tight nickel sulphate raw materials has not improved, and attention should be paid to the cost support from nickel prices and intermediate products for nickel salt prices.

Futures: Overnight, the LME lead 3M contract opened at $1,981/mt. At the start of the session, prices were at intraday highs, then came under pressure and began a pullback. During the Asian session, it fluctuated downward with the price center gradually shifting lower. Entering the European session, bulls struggled to rebound, selling pressure above mounted, and the market continued to fluctuate downward. It dipped to the intraday low of $1,960/mt. Near the close, it stabilized slightly, finally settling at $1,962.5/mt, recording a small bearish candlestick, down $18.5/mt or 0.93%. Overnight, the SHFE lead 2607 contract opened at 16,115 yuan/mt. Initially, prices briefly rose to an intraday high of 16,140 yuan/mt before the bulls lost momentum. The market then fluctuated downward overall, with prices gradually pulling back, dipping to 16,060 yuan/mt. Near the close, it rebounded slightly, finally settling at 16,100 yuan/mt, recording six consecutive bearish candles, down 30 yuan/mt or 0.19%. On the macro front: The US military confirmed a second consecutive day of strikes against Iran. Trump: The deal is done, and now only requires Iran's signature on the documents. Iran will be given a few more days to consider. US media report that two additional demands from Trump caused the delay. US May CPI rose to a three-year high YoY. Trump commented: I love inflation. BOJ Governor Ueda will miss next week's rate decision due to hospitalization. Bureau of Statistics: May consumer prices rose 1.2% YoY. Hong Kong SFC: Hong Kong-licensed companies can continue to serve existing mainland clients, but cannot offer services in mainland China. Spot fundamentals: SHFE lead remained in the doldrums. Suppliers were not keen on selling. Some suppliers, considering semi-annual fund repatriation, quoted and sold as usual, and a few even offered at wider discounts. Most electrolytic lead from mainstream regions was quoted at parity with the SMM #1 lead average price at factory. For secondary lead, smelters either suspended quotations or held prices firm. Some secondary refined lead was quoted at premiums of 0-50 yuan/mt over SMM #1 lead at factory, continuing to be inverted with primary lead. Downstream enterprises bought the dip as needed, but with strong risk-aversion sentiment, purchases were scattered and in small volumes. Inventory side: As of June 10, LME lead inventory decreased by 825 mt to 307,225 mt. As of June 8, total social inventory of lead ingots in five regions reached 64,700 mt, down 2,100 mt from June 1 and 2,400 mt from June 4. Lead price forecast today: Sentiment-wise, geopolitical tensions flared up again, broadly weighing on the non-ferrous metals sector. Demand side, end-use consumption recovery is not as strong as peak season expectations, and downstream enterprises maintain a cautious purchasing sentiment. Inventory side, LME lead and China lead ingot inventories continue to pull back, forming bottom support for lead prices; coupled with secondary lead smelters holding prices firm and holding back from selling due to cost constraints, further underpinning lead prices. Currently, in east China, secondary lead enterprises are experiencing both production suspensions and resumptions, with bullish and bearish factors intertwined in the market. Short-term lead prices are expected to maintain a fluctuating trend.

After several rounds of sharp lithium price volatility, companies across the battery supply chain have become increasingly focused on raw-material risk management. Long-term agreements, spot procurement frameworks, futures and standard options are gradually becoming part of the procurement toolkit. At the same time, a more complex type of structured product has also attracted attention from industry participants: the Accumulator . At first glance, an accumulator contract offers a procurement opportunity at a price below the prevailing market level. In a range-bound or moderately rising market, it can indeed help reduce average procurement costs. However, the discount is not free. By obtaining a more favourable purchase price, the company is effectively selling part of its downside protection to the counterparty: it receives a limited procurement discount in exchange for assuming tail risk if prices fall. This article examines the basic mechanics of accumulators, their potential applications in the battery supply chain, their transmission effects on market prices and inventories, and the key issues companies should consider when using such instruments. 1. What Is an Accumulator? An accumulator is not a single standardized option. It is an over-the-counter structured contract under which the reference price is observed on a daily, weekly or monthly basis and procurement volumes accumulate over time. Under a typical structure, a downstream buyer agrees with a bank, trader or financial institution to purchase a specified quantity of raw-material exposure at a fixed price over a defined period. The agreed purchase price is usually below the prevailing spot price at inception, making the structure appear attractive from a pricing perspective. However, the contract normally includes two important features. The first is the knock-out mechanism . If the market price rises to a predetermined level, the contract terminates early. The buyer retains the discounts already obtained but can no longer continue purchasing at the discounted price. The second is the volume-multiplier mechanism . If the market price falls below the agreed strike price, the buyer is required to continue purchasing a larger quantity. A common structure is a doubling of the purchase volume, although other multipliers may also be agreed. This creates a clear asymmetry: Market Scenario Outcome for the Buyer Prices rise moderately but remain below the knock-out level The buyer continues purchasing at a price below spot and benefits from the discount Prices rise rapidly and reach the knock-out level The contract terminates early; previous discounts are retained, but the buyer must return to the spot market for future procurement Prices fall below the strike price The buyer must continue purchasing at the agreed price and at a higher volume, usually double the original quantity Prices continue to fall High-cost purchases accumulate, inventory pressure increases and cash-flow exposure expands; theoretical losses are uncapped The defining feature of the accumulator is therefore not simply price locking. It is the exchange of limited procurement discounts for downside tail-risk exposure. 2. Why Would Downstream Battery Companies Consider This Type of Structure? Several characteristics of the battery supply chain make accumulator structures attractive under certain conditions. First, raw-material prices can be highly volatile. Lithium prices have experienced both rapid increases and prolonged declines. For cathode-material producers and battery-cell manufacturers, changes in lithium carbonate prices can quickly affect product costs and profit margins. Second, there is a clear timing mismatch across the supply chain. Companies often need to secure raw materials in advance, while downstream orders and actual deliveries remain uncertain. When prices rise, buyers worry about insufficient procurement coverage. When prices fall, they worry about having locked in excessive volumes at elevated prices. Third, some downstream companies prefer not to pay the explicit upfront premium associated with standard options. An accumulator embeds knock-out and volume-multiplier provisions, converting part of the visible premium into conditional risk. This can make the initial pricing appear more attractive. However, this does not mean accumulators are suitable for every company. They are more appropriate for companies with stable raw-material demand, strong cash-flow capacity, mature risk-management systems and professional derivatives teams. For companies with volatile demand, limited inventory capacity or significant funding pressure, accumulators can materially amplify operating risk. 3. A Simplified Scenario: How Does an Accumulator Work? Consider a cathode-material producer. At the time of signing, the spot price of lithium carbonate is RMB 100,000 per tonne. The company is concerned about a possible price rebound and wants to lock in part of its future procurement cost. A simplified accumulator structure could be designed as follows: Contract Term Illustrative Setting Spot price at inception RMB 100,000/tonne Accumulator strike price RMB 90,000/tonne Knock-out price RMB 110,000/tonne Base purchase volume 100 tonnes per month Purchase volume if price falls below strike 200 tonnes per month Contract tenor 12 months Scenario 1: Prices Rise Moderately The lithium carbonate price rises from RMB 100,000 to RMB 105,000 per tonne but does not reach the knock-out price of RMB 110,000 per tonne. The company continues purchasing at RMB 90,000 per tonne and gains a procurement advantage of RMB 15,000 per tonne. This is the most favourable environment for an accumulator: prices remain range-bound or rise moderately, allowing the buyer to continue benefiting from discounted procurement. Scenario 2: Prices Rise Rapidly and Trigger the Knock-Out The lithium carbonate price rises to RMB 110,000 per tonne, triggering the knock-out mechanism. The contract terminates early. The company retains the discounts already achieved but must return to the spot market for future purchases, now at a higher price level. This demonstrates that an accumulator provides only limited protection against extreme upside risk. Scenario 3: Prices Fall Below the Strike Price The market price falls to RMB 70,000 per tonne. The company must still purchase at RMB 90,000 per tonne, and the monthly purchase volume doubles from 100 tonnes to 200 tonnes. The monthly cost disadvantage reaches RMB 4 million. If the price falls further to RMB 50,000 per tonne, the monthly cost disadvantage increases to RMB 8 million. If actual production demand is insufficient, the additional volumes cannot be consumed immediately and will become involuntary inventory. The core risk of an accumulator is therefore not price volatility alone. It is that the company is forced to expand its exposure precisely when market prices move against it. Procurement volumes, inventory pressure and cash-flow risk rise at the same time. 4. How Can Accumulators Affect Lithium Market Prices and Inventories? When a market contains a meaningful volume of outstanding accumulator contracts, physical orders alone may no longer fully explain procurement behaviour. Traditional supply-demand analysis usually focuses on mine output, lithium chemical production, cathode-material production schedules and end-use demand. However, financial instruments can influence physical procurement patterns around specific price levels, creating signals that do not fully reflect underlying fundamentals. When accumulator contracts are concentrated around a particular price range, three phenomena may emerge. First, Downstream Procurement May Increase as Prices Fall Falling prices would normally suggest weakening demand. However, if accumulator contracts trigger volume multipliers, downstream companies may be required to increase purchases. Some market participants may interpret this as restocking or demand recovery. In reality, part of the additional procurement may be driven by contractual obligations rather than improved end-use demand. Second, Inventory Composition May Change High-cost inventory accumulated through contractual obligations may not immediately return to the market. However, it can reduce companies’ willingness to make additional discretionary purchases and create destocking pressure when prices recover. Inventory analysis should therefore go beyond total volume. It should also examine how inventory was accumulated and at what cost. Third, Liquidity May Become Distorted Around Key Price Levels If a large number of contracts are concentrated near similar trigger prices, volume multipliers, margin changes and dynamic hedging by counterparties may jointly affect market liquidity. This can create short-term volatility that appears disconnected from the underlying supply-demand balance. It is important to emphasize that the price impact of accumulator structures is not necessarily one-directional. The effect depends on whether contracts are physically settled, how counterparties hedge their positions, whether contract sizes are sufficiently large and whether exposures are clustered around similar price levels. For analysts, periods of significant lithium price volatility require closer attention to procurement behaviour, unusual increases in transaction volumes during price declines and signs of involuntary inventory accumulation. An increase in procurement during a falling market should not automatically be interpreted as a recovery in real demand. 5. Lessons from the 2023–2024 Lithium Price Downturn Lithium carbonate prices declined by more than 80% from their peak during the 2023–2024 downturn. This provides a useful stress-test scenario for evaluating the risks embedded in accumulator structures. If downstream companies had entered large accumulator positions with relatively high strike prices during the elevated-price period, a prolonged decline would have amplified the pressure through volume multipliers, high-cost inventory accumulation and cash-flow requirements. The key lesson is that the knock-out mechanism terminates gains during price increases, while the volume-multiplier mechanism magnifies losses during price declines. This structural asymmetry can become particularly severe in highly volatile commodity markets. A company may have stable physical demand, but stable physical demand does not automatically mean that its financial exposure is safe. Because accumulator contracts are generally customized over-the-counter instruments, public markets rarely provide complete information on individual companies’ positions, strike prices or contract tenors. It is therefore more appropriate to view the 2023–2024 downturn as a risk scenario rather than as confirmation of any specific company’s actual transaction behaviour. 6. How Should Companies Use Accumulator Structures Prudently? Accumulators are most suitable for managing a portion of highly certain procurement demand. They should not replace the overall procurement framework. A more appropriate approach is to integrate accumulators into a layered procurement system rather than use them as the primary tool. Demand Category Characteristics More Suitable Instruments Base demand Supported by confirmed orders and rigid procurement needs Long-term agreements, spot frameworks and futures hedging Flexible demand Order probability is relatively high, but delivery timing may vary Staged spot procurement, futures or standard options Strategic demand The company can tolerate some volume variation and seeks to optimize average procurement cost Small-scale accumulator positions In practical terms, companies should focus on at least four constraints. Link the Structure to Real Procurement Demand The base volume under the accumulator should remain materially below confirmed procurement requirements. Even after the multiplier is triggered, the company should still be able to absorb the resulting volume through actual production. If a company needs 500 tonnes per month, it should not set the base accumulator volume at 500 tonnes. Once doubled, the required purchase volume would materially exceed actual consumption. Link the Structure to Inventory Limits Companies should define inventory limits in advance, including: Maximum inventory volume; Maximum inventory days; Maximum proportion of high-cost inventory; Warehouse capacity; Working-capital requirements. If the additional purchase volume triggered by a price decline would exceed these limits, the company should not expand its accumulator exposure. Conduct Stress Testing Before signing, the company should model scenarios in which prices fall by 20% or 40%, remain below the strike price for six consecutive months, downstream orders fall short of expectations and inventory turnover slows. Only companies that can maintain cash-flow safety under extreme scenarios should consider using accumulator structures. Ensure the Pricing Benchmark Matches the Physical Exposure Battery materials are not fully standardized products. If the specification or delivery location of the company’s physical lithium carbonate procurement differs from the settlement benchmark used in the derivative contract, basis risk may arise and reduce the effectiveness of the hedge. The contract should clearly define: Reference product; Product specification; Delivery location; Settlement benchmark; Price source; Quality differentials. Companies should not focus only on whether the strike price appears attractive. 7. What Problems Cannot Be Solved by Accumulators? Accumulator structures can help reduce a portion of procurement costs, but they cannot eliminate all supply-chain risks. First, they cannot solve physical supply shortages. If the market experiences resource constraints, logistics disruptions or supplier defaults, a cash-settled accumulator cannot provide physical material. Second, they cannot fully protect against extreme price increases. Once the knock-out level is triggered, the company must return to the spot market. Third, they cannot replace inventory discipline. Even a discounted purchase price can become a burden if the company lacks effective inventory management. Fourth, they cannot create real demand. Financial instruments do not generate physical orders. Companies should not expand procurement merely because a discounted purchase opportunity exists. Fifth, they cannot eliminate basis risk. Differences in product specifications, quality, geography and trading terms may still reduce hedging effectiveness. Conclusion Accumulator contracts are not inherently unsuitable, but they must be placed within a strict procurement-management framework. They can serve as a complementary tool alongside spot procurement, long-term agreements, futures and standard options. In range-bound or moderately rising markets, they may help companies optimize average procurement costs. However, the discount comes from risk transfer rather than risk elimination. The buyer receives a limited price advantage while assuming the obligation to expand purchase volumes, increase inventory and absorb greater cash-flow pressure when prices fall. From the perspective of lithium market analysis, accumulators introduce an important additional dimension: An increase in procurement during a falling market does not necessarily indicate real demand recovery. An increase in inventory does not necessarily indicate active restocking. Around key lithium price levels, the impact of financial contracts on physical procurement behaviour deserves close attention. Disclaimer: This article provides an analysis of market mechanisms based on commonly used industry structures and publicly available information. It does not constitute confirmation or implication of any specific company’s actual positions, trading activities or financial condition. Lesley Yang Senior New Energy Analyst, SMM yangle@smm.cn