In May, the global aluminum market continued the core pattern of LME outperforming SHFE with divergent trends. The most-traded SHFE aluminum contract moved sideways in the doldrums, while LME aluminum maintained strength supported by low inventory and geopolitical premiums, with both seeing slight corrections at month-end. This month's market-driving logic revolved around Middle East ceasefire negotiations, rising expectations for US Fed interest rate hikes, divergence in inventory in and outside China, and accelerating export transmission, further highlighting the divergence between domestic and overseas aluminum price trends. The SHFE/LME aluminum price ratio declined further from the April average of 7.03 to the May average of 6.66, with the inverted price spread between domestic and overseas markets widening, as the trend of overseas aluminum prices outperforming SHFE aluminum continued to deepen. May Aluminum Price Review: Similar Pace but Intensifying Divergence in Strength China · The Most-Traded SHFE Aluminum Contract The contract opened low at around 24,800 yuan/mt at the beginning of the month. After the holiday, it pulled back rapidly due to high domestic inventory and weaker-than-expected downstream demand, hitting the monthly low of 24,075 yuan/mt on May 7. In mid-month, it rebounded to 24,620 yuan/mt driven by positive signals from the China-US meeting. In the latter part of the month, it pulled back to 24,375 yuan/mt as ceasefire expectations heated up combined with off-season drag. Ex-China · LME Aluminum The contract opened at $3,480/mt at the beginning of the month. In mid-month, it rallied to $3,680/mt (the monthly high and a four-year high) supported by supply disruptions and continued destocking. At month-end, it corrected to $3,628/mt, impacted by news that a US-Iran ceasefire agreement was 95% reached. In terms of price-driving factors, geopolitics remained the core common variable for aluminum prices in and outside China this month. Production cuts in the Middle East and shipping disruptions through the Strait of Hormuz continued to provide a shortage premium for LME aluminum. The price divergence stemmed from dual differences in macro policy and fundamentals—slow destocking from high inventory levels in China constrained SHFE aluminum's rebound space, while historically low inventory and a high premium structure outside China provided strong support for LME aluminum prices. Core Inventory Indicators: Extreme Divergence Between Domestic and Overseas Inventory with Contrasting Destocking Pace China · Gradual Decline from High Levels, Pressure Persists Social inventory began to pull back from the high of 1.456 million mt at the beginning of May, reaching approximately 1.401 million mt by month-end, with only about 55,000 mt destocked over the entire month. The destocking pace was slow, with inventory remaining at a near six-year high for the same period. SHFE warrants recorded 485,500 mt on May 29, still showing inventory buildup on a weekly basis, confirming ample spot supply in China. Ex-China · 20-Year Low, Structural Deficit Becomes Evident LME total inventory declined from approximately 363,000 mt at the beginning of the month to 338,000 mt at month-end, a decrease of approximately 25,000 mt over the month, with inventory levels at historically extreme lows. LME aluminum Cash-3M premiums closed at $92.53/mt at month-end, widening significantly from approximately $29/mt at the beginning of the month. Japan's Q3 spot premiums rose, premiums in Europe and the US continued to climb, and the rigid supply gap outside China provided sustained and strong support for LME aluminum. Macro and Fundamentals Intertwined: Geopolitical Dynamics and Rate Hike Expectations Dominating Sentiment Geopolitical Variables: Repeated Ceasefire Negotiations At the beginning of the month, the US military launched airstrikes on southern Iran, with military frictions between the two sides recurring. Shipping through the Strait of Hormuz remained disrupted, and geopolitical risk premiums climbed. At month-end, a US-Iran framework agreement was reportedly 95% complete, and a 60-day temporary ceasefire draft emerged. Expectations for the resumption of strait navigation warmed, and geopolitical premiums converged significantly. On the morning of May 28, both SHFE aluminum and LME aluminum plunged. US Fed Expectations: Hawkish Pressure US April CPI came in at 3.4% YoY, with core PCE reaching 2.8%. Inflation stickiness, compounded by Middle East conflicts pushing oil prices above $90/barrel, led hawkish US Fed officials to release signals of "raising rates at any time." Market expectations for a 25bp rate hike within the year surged abruptly, and a stronger US dollar continued to weigh on the demand outlook for non-ferrous metals. IV. Current Core Market Trades and Arbitrage Strategies (Including Divergence in Capital Behavior) Based on the current SHFE and LME fundamentals, inventory pace, and LME curve structure, the aluminum market overall exhibits a cautious unidirectional and arbitrage-dominated trading pattern. In particular, SHFE-LME cross-market reverse arbitrage (selling SHFE and buying LME) has become the core market play. Capital behavior among market participants has shown clear divergence, mainly falling into three categories: 1. Early-positioning capital (light long positions in reverse arbitrage) Some trading capital has positioned reverse arbitrage ahead of time based on the logic that China's inventory inflection point has already appeared. The core expectation of such capital is that as China's inventory gradually enters a destocking channel, accelerated destocking is highly likely to follow, rapidly easing China's high inventory pressure. The weak SHFE aluminum pattern is expected to be corrected, and the depressed SHFE-LME ratio has clear room for recovery, warranting early light positioning to capture the ratio rebound. 2. Wait-and-see cautious capital (staying on the sidelines for now) The majority of market capital has maintained a wait-and-see stance, with two core concerns: First, China is currently only experiencing slow destocking, and its sustainability is questionable during the off-season, as inventory pressure has not been substantially cleared and SHFE aluminum lacks sufficient rebound momentum. Second, LME is currently in a deep backwardation structure, making roll and extension costs for LME aluminum bulls extremely high, with significant cost erosion and high open interest pressure for holding long-term reverse arbitrage positions. Combined with the entrenched short-term pattern of LME outperforming SHFE, the price spread still risks further widening. Therefore, this segment of capital has chosen to wait for confirmed signals of accelerated destocking in China before entering the market. 3. Previously trapped capital (open interest under pressure, caught in a dilemma) Some positions that were established earlier to set up SHFE-LME reverse arbitrage are currently slightly underwater. Recently, LME has been continuously driven higher by geopolitical risks while SHFE has been range-bound and weak, with the divergence between LME outperforms SHFE intensifying, causing the ratio to remain persistently low and unrealized losses to emerge. Meanwhile, LME contango fees have risen sharply, long positions carrying costs continue to increase, and the pressure of holding trapped positions has further intensified. In the short term, these positions are caught in a dilemma, highly dependent on the subsequent pace of China's inventory destocking to restore the spread. Overall, the sole core inflection variable for SHFE-LME reverse arbitrage is currently the pace of domestic inventory destocking. Once weekly inventory drawdowns continue to widen and accelerated destocking is confirmed, it will directly drive a reversal in three types of capital behavior: sidelined capital entering the market en masse, trapped positions getting unwound, and early-entry positions realizing profits, triggering a rapid recovery in the ratio. Looking ahead to June, the aluminum market's core focus centers on three dimensions: first, whether the US-Iran ceasefire agreement can be formally signed and the pace of resuming navigation through the Strait of Hormuz, which will directly determine the extent of geopolitical premium convergence — if the agreement materializes and Middle Eastern aluminum supply gradually recovers, the prior support logic for LME aluminum faces correction risk; second, whether domestic inventory destocking can accelerate — continued export growth and import suppression will keep driving destocking, and the magnitude of destocking will determine SHFE aluminum's upside elasticity. The US Fed's June FOMC meeting is highly likely to keep rates unchanged, but a hawkish tone and sticky inflation will continue to suppress interest rate cut expectations, with a stronger US dollar maintaining sustained pressure on non-ferrous metals. Overall, the aluminum market in June is expected to continue the pattern where LME outperforms SHFE, though the degree of divergence is likely to narrow. LME aluminum is expected to hover at highs amid the tug-of-war between geopolitical premium convergence and rigid ex-China supply deficits, with downside room constrained by low inventory and high premiums. [ Data source disclaimer: Data other than publicly available information is derived from public information, market communication, and SMM's internal database models, processed by SMM for reference only and does not constitute decision-making advice. ] Data source: SMM

[Price Review] Silver prices remained under pressure this week, primarily due to renewed geopolitical tensions in the Middle East, sustained expectations for US Fed interest rate hikes within the year, and strong performance in European and US equity markets that continued to divert funds from the precious metals market. On the macro front, newly appointed Fed Chairman Waller officially took office, with his hawkish stance reinforcing market tightening expectations; US-Iran negotiations remained volatile—according to Reuters on May 28, the US military launched a new round of strikes on military facilities within Iran. On the industrial demand side, as silver prices declined during the week, mainstream quotations and spot transaction discounts both narrowed. However, some suppliers had limited willingness to sell due to tax invoice audits and the approaching month-end, combined with downstream consumption still showing no significant improvement. Only some downstream enterprises lacking tax invoice input credit could accept small quantities at high premiums. The spot market overall exhibited sluggish trading on both sides, with inventory continuing to accumulate. Gold/silver ratio side, as of May 27, the LBMA gold/silver ratio rebounded to 62x, continuing to widen WoW. [Key Data] Bearish Waller officially assumed the role of Fed Chairman, with a clearly hawkish tone. US-Iran negotiations saw major reversals, causing market expectations to become chaotic. On May 25, Iran stated it had reached consensus with the US on most issues, but on May 28, Trump publicly stated that "Iran negotiations have made no progress." Speculative funds withdrew on a large scale—COMEX silver non-commercial net long positions declined sharply for three consecutive weeks, with cumulative reductions exceeding 25,000 contracts. Previously inflowing speculative funds concentrated on closing positions, amplifying the magnitude of silver's price decline. Bullish: Peru's energy crisis continued, with a national state of emergency extending to year-end. Twelve large mines have implemented staggered production schedules, and May silver production is expected to decline 5%-8%, with the global supply-demand gap persisting. [Upcoming Focus] May 29: US May University of Michigan Consumer Sentiment Index (final) June 3: US May ISM Manufacturing PMI June 5: US May Non-Farm Payrolls Report June 12: US May CPI Data Key focus: Fed officials' speeches, latest developments in US-Iran negotiations, execution of production restrictions at Peruvian mines [Price Forecast] Silver is expected to hover at lows in a bottoming pattern next week, with core variables being Fed officials' speeches and the direction of US-Iran negotiations. Current market sentiment is extremely cautious, with macro headwinds remaining the dominant factor, and the previous supply-side speculation narrative having largely faded. Operationally, a wait-and-see approach is recommended, pending clear stabilization signals. China fundamentals side, downstream buying sentiment remains cautious, overall consumption is still sluggish, and spot silver ingot social inventory continues to accumulate. However, as silver's absolute price has declined and bank floor purchase price discounts have narrowed, mainstream spot transaction discounts are expected to contract slightly to a range of 20-0 yuan/kg discount to the SGE TD price.

[Price Review] Silver fell sharply at the beginning of this week, mainly due to repeated Middle East geopolitical tensions with slow progress in US-Iran negotiations, critically low global crude oil inventories driving oil prices higher, combined with rising interest rate hike expectations and rising US Treasury yields, which continued to weigh on precious metals valuations. On Wednesday evening, as US-Iran tensions eased somewhat, oil prices declined while medium- and long-term US Treasury yields both pulled back, and precious metals futures rebounded slightly. On the macro front, new Fed Chairman Waller delivered his first public speech maintaining a hawkish stance. Combined with US April non-farm payrolls and CPI both exceeding expectations, interest rate hike expectations continued to rise, with expectations for rate cuts within the year nearly zeroed out. CME Fed Watch showed a 97.3% probability of the US Fed holding rates unchanged in June and a 2.7% probability of a rate cut; a 72.7% probability of rates remaining unchanged from current levels in September, a 2% probability of a rate cut, and a 25.4% probability of a rate hike. Industrial demand side, at the beginning of the week, downstream consumption recovered slightly as silver prices declined, but demand quickly faded as prices rebounded. Some suppliers also showed weak willingness to offer due to continuously widening transaction discounts, with the price spread between high and low offers widening. The silver spot market remained generally low in activity, and inventory continued to increase slightly. Gold/silver ratio, as of May 20, the LBMA gold/silver ratio rebounded to 59x, widening notably WoW. [Key Data] Bearish New Fed Chairman Waller delivered his first speech on May 15 with an extremely hawkish tone, explicitly stating there was no reason for rate cuts in the near term and not ruling out the possibility of resuming rate hikes. April CPI came in at 3.8% YoY (the highest since May 2023), core CPI at 2.8% (the highest since September 2025), and PPI at 6.0% YoY (the largest single-month increase in over four years), with inflation stickiness exceeding market expectations. The US dollar index rebounded above 105, the 10-year US Treasury yield broke through 4.5%, and the 30-year US Treasury yield reached above 5%, significantly raising the opportunity cost of holding precious metals. India raised silver import tariffs from 6% to 15% while tightening import quotas, causing demand from the world's largest physical buyer to drop sharply. Bullish: Peru's energy crisis continued, with a national state of emergency extending through year-end. Twelve large mines have implemented staggered production, and May silver production is expected to decline by 5%-8%, with the global supply-demand gap persisting. US-Iran negotiations saw new positive progress, with both sides engaging in indirect contact through Qatar and reaching preliminary consensus on some core disagreements. [Upcoming Focus] May 22: Waller's inauguration speech; Eurozone and UK May manufacturing PMI preliminary readings May 23: US May Markit manufacturing and services PMI preliminary readings May 27: US 2026 Q1 real GDP annualized quarterly rate revised value May 28: US April core PCE price index, weekly initial jobless claims Key focus: Waller's official inauguration speech as Fed Chairman, US-Iran negotiation progress [Price Forecast] Silver is expected to remain under pressure with adjustments next week, with core variables being Waller's inauguration speech and US-Iran negotiation progress. The market is closely watching Warsh's debut and four key focus areas: the US Fed's stance on independence, inflation framework reform, interest rate path, and balance sheet reduction pace. Combined with Warsh's previous policy positions, if he insists on prioritizing anti-inflation efforts and releases expectations of retaining the rate hike option, precious metals are expected to face sustained suppression in the short term. On the China fundamentals side, downstream buying sentiment is generally cautious. The decline in silver's absolute price has not significantly boosted downstream demand, and wait-and-see sentiment remains strong. Social inventory of spot silver ingots has increased slightly, and the market expects spot mainstream transaction discounts to widen slightly to the SGE TD discount range of 50-20 yuan/kg.

[Price Review] Silver fluctuated upward this week, charting an independent trend with gains significantly outpacing gold. On the news front, Peru was hit by a sudden energy crisis and issued a national emergency decree; power rationing is expected to cause mine shutdowns, thereby affecting supply. As the world's 12th largest mining country, Peru holds 21.8% of global silver reserves, which ignited the silver rally. On the macro front, US April non-farm payrolls and CPI both exceeded expectations, with the inflation rebound reinforcing the US Fed's stance on delaying interest rate cuts, with probabilities of holding rates unchanged in June and July reaching 93.5% and 86.5%, respectively. Industrial demand side, the spot market remained weak; rising absolute silver prices continued to suppress downstream demand. Suppliers generally reported sluggish market transactions and weak buying sentiment, leading to low enthusiasm for offering quotes, a widening price spread between high and low quotes, and an overall tepid trading atmosphere in the spot market, with spot inventory continuing to accumulate. Gold/silver ratio, as of May 13, the LBMA gold/silver ratio fell to 54, hitting a new low since 2013. [Key Data] Bullish: Peru was hit by a sudden nationwide energy crisis and declared a state of emergency lasting until year-end, with mine power usage restricted. If strict power rationing is enforced, silver production is expected to decline by 3%-10%, and the global supply-demand gap is expected to widen by 15%-30%. US April non-farm payrolls data showed a continued divergence of "strong services, weak manufacturing," highlighting a stagflation pattern. Bearish US April CPI came in at 3.8% YoY and core CPI at 2.8% YoY, both exceeding expectations, reinforcing the US Fed's stance on delaying interest rate cuts. US-Iran negotiations reached an impasse, with the US side fully rejecting Iran's proposal amid major core disagreements; shipping risks in the Strait of Hormuz persist. Hawkish Warsh was officially confirmed as the next Fed Chairman, and multiple officials stated they do not rule out the possibility of resuming rate hikes. [Recent Focus] May 15: New Fed Chairman Warsh's first public speech. May 16: US April retail sales, May New York Fed Manufacturing Index. May 17: US initial jobless claims, April industrial production MoM. May 20: US April core PCE price index. [Price Forecast] Silver is expected to see wild swings at elevated levels next week, with the core variables being the implementation of power rationing in Peru and progress in US-Iran negotiations. Amid the risk of prolonged US inflation, stagflation trades are poised to become the core narrative for the next round of precious metals rallies. If a de-escalation in geopolitical conflicts drives oil prices to pull back, it will provide favorable conditions for opening a monetary easing window after Warsh assumes the role of Fed Chairman. On the fundamentals side in China, downstream buying sentiment remained persistently weak. The continued rise in the absolute price of silver kept suppressing downstream demand, with heavy wait-and-see sentiment. Social inventory of spot silver ingots continued to accumulate, and the mainstream spot transaction discount in the market is expected to remain in the range of a 40-10 yuan/kg discount to the SGE TD price.

[Price Review] This week, expectations for a US-Iran ceasefire continued to heat up, with US media reporting that the US and Iran were close to reaching a ceasefire agreement, driving a sharp pullback in crude oil and a retreat in medium- and long-term US Treasury yields from highs, which propelled a significant rally in precious metals, with silver's gains notably outpacing gold. US April ADP employment data released this week showed an addition of 109,000 jobs, hitting a nearly 15-month high and highlighting the overall resilience of the labor market. The market has now turned its focus to Friday evening's non-farm payrolls report. On expectations for US Fed interest rate cuts, the latest CME data showed that market bets on near-term US Fed rate cuts remained at low levels, with a 93.5% probability of maintaining the current rate at the June FOMC meeting, corresponding to a 6.5% probability of a rate cut; the probability of holding rates steady at the July meeting reached 86.5%, with a 13.5% probability of a rate cut. Industrial demand side, downstream consumption remained sluggish, with downstream participants taking a cautious wait-and-see approach amid the silver price rebound, and only some downstream enterprises making just-in-time procurement. Gold/silver ratio side, as of May 6, the LBMA gold/silver ratio fell to 61. [Key Data] Bullish: On May 6, the US side stated it was close to reaching a ceasefire memorandum with Iran. If the agreement materializes, the pullback in oil prices would ease inflationary pressures and weaken the US Fed's hawkish stance. Dovish divisions within the US Fed persisted, with some officials still believing there was room for multiple interest rate cuts within the year, keeping the rate cut window open and preventing a complete reversal of easing expectations. Concerns over slowing US economic growth emerged, with market expectations for US Q1 GDP growth pulling back sharply from the previous reading. Stagflation and recession fears reinforced safe-haven allocation demand for silver. Bearish: US April ADP employment added 109,000 jobs, hitting a nearly 15-month high and highlighting the overall resilience of the labor market. The April FOMC meeting kept rates unchanged. CME data showed a 93.5% probability of holding rates steady in June, with expectations for rate cuts within the year contracting to 0–1 times, and the US dollar and real US Treasury yields held up well. China's silver industrial demand remained subdued, with downstream PV and electronics enterprises maintaining just-in-time procurement, and social inventory of spot silver ingots continued to accumulate. Key data and macro developments to watch in the near term include: May 7: Bank of England interest rate decision, ECB April monetary policy meeting minutes. May 8: US April non-farm payrolls report. May 12: US April CPI data. In addition, close attention should be paid to the progress of the US-Iran ceasefire agreement. [Price Forecast] US-Iran ceasefire negotiations have entered a critical window. Although both sides have released signals of peace talks, core demands have not yet been reconciled. Whether the agreement ultimately materializes and whether new uncertainties emerge regarding navigation through the Strait of Hormuz will continue to dominate market risk appetite, serving as the core variable affecting silver's short-term trajectory. Against this backdrop, silver is expected to first see a volatile rebound and then consolidate at highs next week, with an overall bullish bias. On the fundamentals side in China, downstream consumption remained sluggish. With the rebound in spot silver prices, downstream enterprises exhibited strong wait-and-see sentiment. The upward trend in social inventory of spot silver ingots has yet to improve, and the mainstream spot market transactions are expected to maintain a slight discount relative to the Shanghai Gold Exchange TD price.

Global Aluminum Market Review – April: Divergent Domestic & Overseas Trends and Marked Spot Structure Disparities The global aluminum market in April featured a core pattern of strength overseas and weakness domestically with diverging trends. The main Shanghai aluminum contract retreated from highs amid fluctuations, while LME aluminum maintained firm momentum supported by low inventories and geopolitical factors, with both markets seeing mild corrections toward month-end. Market drivers this month centered on macro policies, geopolitical conflicts, supply-demand fundamentals and inventory structures, with movements of key indicators further highlighting supply-demand imbalances between domestic and overseas aluminum markets. I. April Aluminum Price Review: Linked Movements with Distinct Strength Differentials Shanghai aluminum and LME aluminum shared similar price rhythms in April, both fluctuating higher initially before retreating. However, notable gaps emerged in upward momentum and correction ranges, with overseas aluminum prices significantly outperforming domestic counterparts. The average Shanghai-LME aluminum ratio dropped from 7.36 in March to 7.03 in April, reflecting stronger overseas aluminum pricing relative to Shanghai aluminum. The main Shanghai aluminum contract trended upward early in the month before softening overall, declining from elevated levels through range-bound trading. It opened lower at RMB 24,715 per ton at the start of the month and consolidated. Driven by escalating Middle East geopolitical tensions and rising LME aluminum prices, it surged to a monthly peak of RMB 25,675 per ton in mid-April. In late April, amid continuous domestic inventory accumulation, weaker-than-expected downstream demand, and risk-averse capital outflows ahead of the May Day holiday, prices corrected steadily. Closing at RMB 24,430 per ton on April 30, the contract recorded a monthly trading range of nearly RMB 1,360 per ton. LME March aluminum traded firmly with mild late-month declines. Opening at USD 3,459 per ton, it climbed to a monthly high of USD 3,672 per ton in mid-April, underpinned by overseas supply disruptions from geopolitical frictions and sustained inventory destocking. Prices edged down later due to fluctuating US-Iran negotiations, hawkish macro sentiment and profit-taking at high levels, settling at USD 3,476 per ton at month-end with a slight monthly loss. Overall, LME aluminum vastly outperformed domestic Shanghai aluminum. In terms of price drivers, geopolitics served as a shared upward catalyst for global aluminum prices, with production cuts and supply disruptions in the Middle East continuously boosting market risk aversion. Price divergence stemmed from dual disparities in macro policies and fundamentals: elevated domestic inventories and sluggish demand consistently capped aluminum price rebounds, while tight overseas inventories and strained spot supplies provided robust support for LME aluminum. II. Key Inventory Indicators: Divergent Inventory Movements and Contrasting Supply-Demand Landscapes As a core gauge of aluminum market supply and demand, domestic and overseas inventory trends diverged sharply in April, directly shaping the relative strength of regional aluminum prices. Domestic aluminum inventories kept rising and stood at a multi-year seasonal high. Social inventories maintained an upward trend throughout April, hitting 1.465 million tons in mid-month, the highest seasonal level in five years. A clear imbalance emerged between rigid supply release and lackluster downstream demand during the traditional peak "Silver April" period, leading to persistent spot market loosening. SHFE warehouse stocks expanded from 420,000 tons at the start of the month to 450,000 tons at month-end. Elevated warehouse stock levels further confirmed ample domestic spot supply, weighing continuously on aluminum prices. Overseas LME aluminum inventories declined steadily to a 20-year low. Total LME aluminum inventories fell from 410,000 tons to 370,000 tons in April, extending months of destocking to historic lows. Noticeable structural divergence persisted in inventory composition: Russian aluminum accounted for approximately 92% of total LME stocks in March, resulting in low market-circulating inventories and increasingly tight physical spot supply, which acted as the fundamental pillar for strong LME aluminum prices. In summary, April’s global aluminum market was governed by contrasting core dynamics: low overseas inventories, geopolitical disruptions and hawkish Federal Reserve policies on the overseas front, versus high domestic inventories, weak real demand and stable growth expectations domestically. This drove pronounced market divergence. Affected by intertwined internal and external factors, the main Shanghai aluminum contract corrected downwards from highs, while LME aluminum remained in a firm trading range, backed by historically low inventories, a tight spot balance and geopolitical risk premiums.