Today, the domestic ore market in Liaodong remained generally stable, with overall resources at mines and beneficiation plants still tight; traders purchased based on demand, pushing for lower prices and controlling volumes, while some mines and beneficiation plants sold at market prices to cash in; steel mills, operating with low inventory, had some rigid procurement demand for iron ore.

Entering Q3, the battery-grade nickel sulphate spot market appears to be "losing vitality," with reduced transaction frequency and relatively weak price trends. SMM believes this is primarily driven by a combination of three factors: weakening cost support, a gradually loosening supply-demand pattern, and a shift in market structure. This article will discuss these three factors in detail. I. Cost Side: Weakening Nickel Prices and Raw Materials Together In terms of nickel prices, August marks the period for the release of additional quotas in Indonesia, which has tempered market expectations of a significant shortage of Indonesian nickel ore. Coupled with the ongoing "shadow" of macroeconomic interest rate hikes, nickel prices have weakened. On the MHP payables front, following the concentrated arrival of sulphur in Indonesia, the supply of Indonesian intermediate products is expected to continue rising. According to SMM data, Indonesia's MHP supply-demand balance turned positive in July for the first time in a month. Meanwhile, downstream nickel and cobalt salt prices (especially cobalt salts) remain relatively weak, and downstream players are under pressure from losses, showing lower acceptance of high payables. Consequently, MHP payables remain under pressure overall. The market availability of high-grade nickel matte remains tight, and its payables are expected to hold steady. With both nickel prices and raw material payables declining, the spot production cost of nickel sulphate in August is expected to weaken overall from a spot cost perspective. II. Supply Side: High Raw Material Flexibility, Production Schedules Expected to Rise Since Q2, although MHP production schedules fell sharply at one point, nickel sulphate supply levels remained relatively stable, and no prolonged undersupply emerged. In Q3, as intermediate product production schedules gradually recover, this trend is expected to become more pronounced. According to SMM data, while battery-grade nickel sulphate production in July dipped 2% MoM due to production cuts or maintenance at some salt plants, August output is expected to rise over 8% MoM, returning supply to high levels. Total battery-grade nickel sulphate production from January to August 2026 grew 33% YoY. Behind this steady output lies strong supply flexibility in nickel salt raw materials. In addition to the adjustments using refined nickel raw materials and the substitution between high-grade nickel matte and MHP discussed in previous articles, recycled materials have also contributed a significant supply scale for nickel sulphate this year. On the one hand, after China opened up imports of lithium battery black mass last year, recycled raw materials have been able to be imported steadily, providing incremental raw material for recycled nickel sulphate. On the other hand, as the scale of ternary battery decommissioning gradually expands, and with some companies launching new recycling projects this year, the overall supply scale of black mass in the industry has risen. According to SMM data, the output from pulverising scrap ternary batteries in July doubled compared to the same period last year, providing significant flexibility for nickel sulphate supply. III. Demand Side: NMC Demand Supports Overall Consumption Volume but Fails to Directly Drive External Spot Purchases NMC demand exceeded expectations this year, serving as a key reason nickel sulphate maintained a relatively high premium. Consumption of nickel sulphate by downstream enterprises is expected to remain elevated in Q3. On one hand, with the September-October peak season for auto sales approaching, top-tier downstream players hold favorable demand expectations for mid-to-high nickel materials, driving higher production schedules at associated precursor plants. On the other hand, overseas high-nickel orders secured by leading firms have also stayed at high levels, supported by robust demand in Europe and other regions and by installation rush strategies triggered by adjustments to battery cell export tax rebate policies. According to SMM data, demand for battery-grade nickel sulphate in the new energy sector rose 1.55% MoM in July and is expected to grow a further 0.9% in August. However, the top-tier precursor enterprises with relatively strong orders are highly integrated, with several possessing refined nickel production capacity and ample flexibility to adjust in-house nickel sulphate output. As a result, the downstream demand increase provides limited direct stimulus to spot nickel sulphate procurement. According to SMM data, the combined production schedule of the five leading integrated and semi-integrated enterprises rose 11% MoM in August, and in-house output can meet over 80% of their raw material needs, meaning the incremental demand for externally purchased nickel sulphate was not significant. IV. Market Structure: Expanding Long-Term Contract Scale Squeezes Spot Order Space A notable structural shift in the Q3 nickel sulphate market is the expansion in the scale of long-term contracts. SMM estimates show that monthly spot orders for nickel sulphate stood at roughly 3,500-4,500 mt in metal content in 2025 and Q1 this year. Against the backdrop of rising NMC demand, this scale has shrunk to around 2,000 mt in metal content in Q3. At the start of the quarter, spot orders were expected to gradually retreat from monthly just-in-time procurement to a supplementary role for long-term contracts in corporate purchasing strategies, with additional purchases made only when clear downstream demand increments or raw material supply disruptions occur. This has suppressed market activity in August and early September. Moreover, with no significant decline in nickel sulphate supply, downstream acceptance of spot prices remains generally low. The expansion of long-term contracts stems from two factors. First, the high volatility in nickel prices and raw materials this year has intensified decision-making pressure on enterprises for spot orders, prompting a tendency to lock in demand through long-term contracts. Second, after persistent overcapacity, few new entrants have emerged, and industry supply chains have stabilized, with upstream and downstream enterprises gradually forming steady cooperative relationships. In the long term, the overall scale of long-term contracts is still expected to trend upward. V. Market Outlook As mentioned above, the supply and demand of nickel sulphate spot orders has shifted from relative tightness in Q2 to a slight surplus. From August to early September, prices are expected to be generally in the doldrums; after the downstream demand for the 'September-October peak season' becomes clear in September, the spot order market activity may recover to some extent, driving a rebound in nickel sulphate prices.

[Pr-Nd series: firm quotes, weak transactions; medium-heavy rare earths steady; magnetic materials slightly recover] Yesterday, influenced by the relatively firm price of Pr-Nd oxide, quotes from metal enterprises saw no significant adjustments. However, downstream purchasing attitudes remained cautious, leading to lackluster market transactions and a sluggish trading atmosphere. In the medium-heavy rare earth market, although inquiry activity remained limited, suppliers' quotes were relatively firm, and the overall market operated stably.

LME aluminium prices have extended their upward momentum in recent sessions. On August 10, LME cash aluminium settled at $3,327.5/mt, while the three-month contract stood at $3,320.5/mt. LME aluminium stocks fell further to 254,900 mt, continuing the sharp decline seen over recent months. Compared with 262,650 mt on August 3, LME aluminium inventories declined by 7,750 mt within a week. More notably, inventories have fallen substantially from 416,775 mt at the end of March, leaving the market with a much thinner visible inventory buffer. The latest rally has been supported by a combination of falling exchange inventories, concerns over short-term supply availability, stronger sentiment across the base metals complex and lingering geopolitical uncertainty. However, downstream demand has yet to strengthen at the same pace, suggesting that the latest rally remains more supply- and sentiment-driven than demand-led. Low LME Inventories Amplify Market Sensitivity The continued decline in exchange inventories has been one of the most direct drivers behind the recent strength in aluminium prices. LME aluminium stocks have fallen to around 255,000 mt, while inventories in China have also shown signs of destocking despite the traditional off-season. With visible stocks remaining low, the market has become increasingly sensitive to marginal changes in physical supply and demand expectations. When inventories are abundant, temporary supply disruptions can be absorbed relatively easily. However, when visible inventories fall to low levels, the market has less of a buffer against unexpected production losses, logistics disruptions or stronger-than-expected physical demand. As a result, even relatively small changes in supply expectations can generate a much larger price response. However, falling LME stocks should not automatically be interpreted as evidence of a sharp improvement in end-user consumption. Some metal may be withdrawn from LME warehouses and transferred to off-warrant storage or directly to consumers. Therefore, movements in cancelled warrants, off-warrant stocks and the LME cash-to-three-month structure remain important indicators when assessing the actual tightness of the physical market. Short-Term Supply Elasticity Remains Limited Earlier expectations were that global aluminium supply would gradually improve as disrupted Middle Eastern capacity recovered and new smelting capacity in Indonesia ramped up. While additional supply is still expected to enter the market, the pace of recovery remains an important uncertainty. Indonesia is emerging as an increasingly important source of new primary aluminium supply, while several Middle Eastern smelters are gradually restoring production. However, newly commissioned capacity requires time to reach stable operating rates, meaning additional tonnes may not immediately offset short-term supply disruptions elsewhere. China's supply response has also become less flexible than in previous cycles. Chinese primary aluminium operating capacity is already running at a high level, while the country's capacity ceiling and energy constraints limit the scope for another large wave of domestic expansion. Historically, higher aluminium prices could encourage rapid capacity additions in China, eventually bringing additional supply into the market and capping prices. The current structure is increasingly different: Higher prices → Chinese operating capacity already near high levels → incremental supply increasingly depends on overseas projects → slower short-term supply response. This structural change means that global aluminium prices may become more sensitive to supply disruptions, particularly when exchange inventories are already low. Broader Base Metals Strength Adds Momentum Aluminium's own fundamentals are not the only factor behind the recent rally. Strength in copper and other base metals has improved broader investor sentiment towards industrial metals, encouraging additional capital flows into aluminium. This has amplified the price response already created by low inventories and supply concerns. The current rally can therefore be characterised as a combination of: Low inventories + supply risk premium + stronger base metals sentiment + momentum-driven buying. This also helps explain why LME aluminium prices have risen faster than the improvement seen in some downstream physical markets. Geopolitical Risks Continue to Add a Supply Premium Geopolitical uncertainty remains another important variable for the international aluminium market. The Middle East remains a major production and export hub for primary aluminium. As a result, uncertainty surrounding regional energy infrastructure, shipping routes and the Strait of Hormuz continues to influence market expectations. Even without another major production disruption, persistent risks surrounding transportation and energy supply can keep a geopolitical premium embedded in aluminium prices. Nevertheless, this should be distinguished from an actual decline in physical production. If geopolitical tensions ease and regional logistics normalise, part of this risk premium could unwind relatively quickly. The Rally Remains More Supply-Driven Than Demand-Led Despite the sharp increase in LME aluminium prices, global aluminium consumption has yet to show a corresponding acceleration. Parts of Asia remain in the traditional seasonal slowdown, while downstream consumers continue to purchase largely on a hand-to-mouth basis. Higher aluminium prices may also discourage aggressive restocking among fabricators and end users. Therefore, SMM believes the latest rally is better characterised by: Low inventories + supply concerns + improving macro and market sentiment rather than a typical: Strong demand-led rally. This distinction will be critical in determining whether aluminium can sustain its recent gains. If physical demand begins to improve while exchange inventories remain low, prices could receive further support. However, if downstream demand remains subdued while Indonesian production ramps up and Middle Eastern supply gradually recovers, the current upward momentum may begin to weaken. Higher LME Prices Provide Support to Aluminium Scrap The rise in primary aluminium prices is also beginning to feed through to the global aluminium scrap market. Several internationally traded scrap grades, including UBC and clean 6063 extrusion scrap, are commonly priced as a percentage of LME aluminium or against an LME-based premium or discount. As a result, higher LME prices can directly lift the nominal purchase price of aluminium scrap even if the underlying percentage remains unchanged. There is also a substitution effect. As primary aluminium becomes more expensive, the economic value of using recycled aluminium increases. Producers may seek to optimise their raw-material mix by increasing scrap consumption where technically possible, providing additional support to scrap demand. This effect may be particularly significant for high-quality scrap with stable chemical composition, low attachments and limited contamination. However, aluminium scrap prices may not rise at the same pace as LME aluminium. Demand for secondary aluminium alloys remains relatively cautious in parts of Southeast Asia. ADC12 buyers in Malaysia and Thailand continue to purchase mainly according to immediate requirements. If LME and scrap prices continue rising while ADC12 prices fail to move higher at the same pace, secondary aluminium producers could face further margin compression. This, in turn, would limit smelters' willingness to accept higher scrap prices. Therefore, while higher LME aluminium prices are expected to provide both cost and substitution support to aluminium scrap, the extent of the increase will continue to depend on downstream secondary aluminium demand. Scrap Is Becoming an Increasingly Strategic Raw Material The relationship between primary aluminium and scrap is also undergoing a longer-term structural change. Growth in recycled aluminium production is expected to outpace primary aluminium over the coming decades as producers seek to reduce energy consumption and carbon emissions while increasing recycled content. Historically, much of the aluminium industry's recycling activity was concentrated on pre-consumer scrap generated during manufacturing. This material already has relatively high recovery rates. The next major source of growth, however, is expected to come from post-consumer scrap. As larger volumes of aluminium used in vehicles, buildings, packaging, machinery, solar equipment and other applications reach the end of their useful lives, the global pool of recoverable aluminium will continue to expand. This means aluminium scrap is gradually shifting from being viewed primarily as a supplementary raw material towards becoming a more strategic feedstock for the aluminium industry. As recycling capacity expands globally, competition for high-quality, traceable and easily recyclable post-consumer scrap could intensify, potentially strengthening the relationship between primary aluminium prices and premium scrap values. Outlook: Can Aluminium Hold Above $3,300/mt? Looking ahead, three factors will be particularly important. First, the market will continue to monitor whether LME and Chinese inventories decline further. Continued destocking would reinforce concerns over limited visible supply and provide further support to prices. Second, the pace of supply recovery will remain critical. Faster-than-expected production recovery in the Middle East or stronger output growth from newly commissioned Indonesian capacity could gradually ease current supply concerns. Third, and most importantly, the market will need confirmation from physical demand. If downstream orders and restocking activity strengthen, low inventories could amplify the impact of improving consumption and provide further upside support. Conversely, if end-user demand remains weak, elevated aluminium prices themselves may begin to suppress purchasing activity. SMM believes the recent LME aluminium rally has been primarily driven by falling exchange inventories, limited short-term supply elasticity, geopolitical uncertainty and stronger sentiment across the base metals complex. Low visible inventories are likely to continue providing support in the near term, but downstream demand has yet to fully confirm the strength of the rally. As overseas production gradually recovers and new capacity comes online, the sustainability of aluminium prices above $3,300/mt will increasingly depend on whether physical demand can catch up with the recent move in futures prices.

In July, the anode material market showed a strong performance pattern marked by "robust supply and demand and solid cost support."

[SMM Coking Coal and Coke Daily Commentary] Coking Coal Market: Low-sulphur coking coal in Linfen was quoted at 2,000 yuan/mt. For coking coal, mine production resumptions remain constrained by safety regulations, limiting supply growth. Downstream inventory is not high, with some restocking demand, providing support for coking coal prices. Online auction sentiment continued to recover, and the short-term coking coal market is likely to consolidate on a strong note. Coke Market: The nationwide average price of quasi-first-grade metallurgical coke – dry quenched was 1,925 yuan/mt. Supply side, high costs and the third round of coke price cuts created a double squeeze, pushing most coke producers into losses. In response, they proactively made modest production cuts. However, some coke producers faced sluggish shipments, leading to a certain degree of inventory buildup. Demand side, a rebound in finished steel prices eased pressure on steel mills, and their production enthusiasm was moderate, leading to an increase in actual rigid demand for coke. Overall, with both supply and demand weak, the supply-demand imbalance in coke fundamentals eased somewhat. With strong cost support, the short-term coke market is likely to enter a temporary stable phase. [SMM Steel]