【SMM Scrap Aluminium Market Analysis】Southeast Asia's Secondary Aluminum Industry Trapped in "Margin Squeeze": Raw Material Surge Forces ADC12 Plant Cuts, Industry May Enter "Lunar New Year Mode" Early February 2026 marked a period of unprecedented regulatory volatility for the global secondary aluminum and scrap markets. Driven by a confluence of tariff upheavals, aggressive decarbonization mandates, and stringent environmental crackdowns, the traditional flow of aluminum scrap is being fundamentally redrawn. As the United States implements sweeping new import surcharges, the European Union weighs restrictive export measures, and Southeast Asian hubs like Malaysia tighten their borders against contaminated materials, market participants are facing mounting compliance costs and disrupted arbitrage windows. This review examines the key policy shifts that defined the ex-China aluminum recycling sector this month and their immediate implications for global trade flows. The United States: How the 10% Surcharge Disrupts Secondary Aluminum Following the United States Supreme Court’s ruling, which invalidated Trump’s IEEPA tariffs on February 20, 2026, many trade goods found themselves navigating a complicated and chaotic new regulatory landscape. Within hours of the ruling, President Trump pivoted to Section 122 of the 1974 Trade Act, levying a 10% blanket global import surcharge that went into effect on February 24, replacing the former country-based tariffs. There have also been threats made by President Trump to raise this surcharge to the statutory maximum of 15%, which could further disrupt global trade and U.S. imports. Even though most primary aluminum products will not see a huge change due to already being burdened by the 50% Section 232 tariffs, the secondary aluminum market, which formerly enjoyed a 0% tariff under Section 232, might now be caught in the newest 10% blanket import surcharge. The US Geological Survey’s Mineral Commodity Summaries 2026, published in February 2026, estimated an increase in imported scrap into the US in 2025, reaching roughly 890,000 metric tons, which is approximately a 27% increase compared to 2024. Even though scrap imports only make up roughly 20% of the US’s total scrap consumption, a blanket import surcharge will likely affect a significant portion of total scrap imports for the active period of the Section 122 policy. This is especially true as the policy remains highly volatile and faces the risk of being increased or challenged in the near future. Europe: The "Scrap Leakage" Debate and Impending Export Controls The EU aluminum recycling sector is also on edge following the closure of the EU’s public consultation in late January. Currently, trade measures are widely expected to be unveiled and launched during Spring 2026, aimed at curbing what the EU terms "aluminum scrap leakage." European Aluminum, as one of the biggest supporters of trade measures to control scrap leakage, cites outflows exceeding 1.3 million tons annually that could instead be utilized domestically to meet decarbonization and net-zero targets. In February, the Bureau of International Recycling (BIR) released statements opposing these trade measures, stating that "the imposition of export restrictions or trade barriers is fundamentally unnecessary and risks producing significant unintended consequences for the entire value chain." BIR also explained how its own monitoring fails to identify scrap leakage issues, noting that the EU currently has insufficient domestic smelting capacity to absorb the extra scrap that is being exported out of Europe. In the same statement, BIR warned of a probable reduction in domestic aluminum scrap prices and a decline in the overall quality of waste management systems. Similarly, in 2025, the European Recycling Industries' Confederation (EuRIC) published stark warnings against the possible restriction of aluminum scrap exports. In a scenario where all grades of aluminum scrap are restricted from being exported, or if exports are hit with a significant surcharge, the Asian market, especially China, India, and Southeast Asia, all of which are large importers of EU scrap would be heavily impacted. Supply would see significant decreases, and prices outside Europe might climb to new highs as markets adjust to fill the gap, while secondary prices within the EU could drop to new lows due to localized oversupply. Malaysia: The E-Waste Crackdown and Stringent SIRIM Enforcement Following the success of "Ops Metal" in 2025, Malaysia has seen a massive volume of illegal scrap imports seized, amounting to a total value of RM 7 billion. In response to the influx of illegal scrap imports frequently mixed with electronic waste, the Malaysian government implemented an absolute e-waste import ban effective February 4, 2026, in order to curb these environmental violations. While aluminum scrap is still legally allowed to be imported into Malaysia, albeit under strict SIRIM purity requirements, the absolute e-waste ban will inevitably affect certain secondary grades. Notably, Zorba imports will likely see significant increases in transit and processing times, as customs officials are now far more likely to detain such cargoes for exhaustive inspections due to the high probability of e-waste contamination. In the broader picture, the volume of aluminum scrap legally entering Malaysia will likely decrease. Coupled with escalating processing delays at customs, this friction increases the probability that businesses will actively divert their aluminum scrap trade elsewhere in Southeast Asia, such as to Thailand. Conclusion Looking ahead to the second quarter of 2026, the secondary aluminum market will likely remain in a state of flux as these regional policies take full effect. The era of frictionless global scrap trade is rapidly giving way to a localized, highly regulated environment. For remelters and traders, navigating this landscape will require extreme supply chain agility and a hyper-focus on material compliance. As European supply risks being politically landlocked, U.S. raw material imports become suddenly more expensive, and Southeast Asian quality barriers rise, we expect to see continued volatility in regional premiums and a widening decoupling of traditional scrap-to-LME pricing mechanisms in certain regions. Adapting to this fragmented reality will be the defining challenge for the industry in the months to come.

This week, the first working week after the Chinese New Year, the cobalt chloride market as a whole showed a stable transition state of "resumption of work but not resumption of market." Although most enterprises have ended their holidays and returned to the market, the market atmosphere has not yet recovered. Companies are still mainly in a wait-and-see mode, with smelters and recycling companies' mainstream quotations holding firm above 115,000 yuan per mt. Downstream Co3O4 and battery cell manufacturers still have pre-holiday stockpiling inventories to digest. Coupled with a general acceptance of current prices, they generally maintain a wait-and-see attitude, and restocking actions have not yet been launched on a large scale. It is expected that a new round of increases will begin in early March. SMM New Energy Research Team Wang Cong 021-51666838 Ma Rui 021-51595780 Feng Disheng 021-51666714 Lv Yanlin 021-20707875 Zhou Zhicheng 021-51666711

According to precious metals and refinery services provider Heraeus, the gold price continues to show a consolidation phase. Following record highs at the end of December, the market is currently moving sideways within a clearly defined trading range rather than forming a pronounced upward or downward trend.

The current year has proven exceptional for gold by any metric.

The LCO market started the week with stable operation, with prices mainly fluctuating slightly in line with upstream lithium carbonate, but overall fluctuations were limited. Currently, cathode producers' quotations for conventional models remain above 400,000 yuan per mt, while high-voltage product quotations hold firm around 420,000 yuan. As the post-holiday period falls within the traditional off-season for consumer electronics, downstream battery cell manufacturers currently exhibit low purchase willingness, mostly adopting a wait-and-see attitude. It is expected that after the new stockpiling cycle begins in early March, LCO prices are likely to continue rising. Wang Cong 021-51666838 Ma Rui 021-51595780 Feng Disheng 021-51666714 Lü Yanlin 021-20707875 Zhou Zhicheng 021-51666711 Zhang Haohan 021-51666752 Wang Zihan 021-51666914 Wang Jie 021-51595902 Xu Yang 021-51666760 Yang Lianting 021-51595835 Wang Zhaoyu 021-51666827

Silver prices opened higher and moved upward this week. Spot silver ingot premiums were quoted relatively small compared to pre-holiday levels at the beginning of the week, with suppliers holding back sales and adopting a wait-and-see approach. After the physical delivery of the February futures contract on the Shanghai Futures Exchange was completed, the supply of circulating spot cargo increased, leading to a gradual decline in market premium quotes. However, there remained significant price differences among different brands of silver ingots. As of Thursday, the premium quotes for national standard silver ingots in the Shanghai market had dropped to 1,600-1,800 yuan/kg, while premiums for ingots from large manufacturers were still maintained at 1,700-2,000 yuan/kg with limited sales. In the Shenzhen area, some small manufacturers offered premiums of 1,400-1,500 yuan/kg for silver ingots against TD. After the holiday, large and medium-sized downstream enterprises showed a slight wait-and-see attitude, completing only just-in-time procurement. However, small and medium-sized enterprises demonstrated higher enthusiasm for stockpiling due to expectations of rising prices or depletion of pre-holiday inventories, leading to a gradual warming of transactions in the spot market. On the inventory side, total social silver inventory saw a slight increase this week. On one hand, downstream processing enterprises were generally closed during the Chinese New Year holiday, while silver smelters maintained normal operations, resulting in the customary inventory buildup during the holiday period. On the other hand, imported crude silver and large ingots entering the domestic market before the holiday temporarily alleviated the previous supply deficit of silver ingots. After the Chinese New Year holiday, smelter inventory was transferred to social inventory or quickly destocked through long-term contracts and spot orders. Due to relatively strong demand from downstream industrial and investment sectors after the holiday, domestic social inventory recorded only a modest accumulation.

Refined Cobalt: This week, spot prices for refined cobalt rebounded from previous lows. Supply side, mainstream smelters steadily raised their ex-works quotations in line with the increase in electronic trading prices. Traders' spot-futures price spreads generally held steady, with spreads for regular brands maintained at discounts of around 2,000 yuan/mt to parity, while spreads for high-end brands remained at premiums of 4,000-6,000 yuan/mt. Demand side, downstream enterprises had just resumed production in the first week after the holiday, mostly adopting a wait-and-see attitude, and actual market transactions had not yet shown a significant increase. The rebound in refined cobalt prices this week was mainly driven by two factors: first, domestic refined cobalt prices had been lower than overseas market prices for an extended period before the Chinese New Year, creating a need for price spread correction; second, recent news that some overseas companies plan to purchase refined cobalt boosted market sentiment. From a fundamental perspective, cobalt intermediate product raw materials have still not arrived in large volumes at ports, and the structurally tight supply of upstream raw materials has not fundamentally changed, which continues to provide some support for cobalt prices. Looking ahead, as downstream enterprises' restocking demand is gradually released, refined cobalt prices are expected to still have upside room. Cobalt Intermediate Products: This week, the cobalt intermediate products market continued to hold up well. Supply side, it is understood that export procedures in the DRC remain relatively cumbersome, and miners have not yet achieved large-scale shipments. Suppliers' expectations for price increases have strengthened, leading them to continue suspending external quotations. Demand side, as time passes, the issue of raw material shortages for domestic smelters has become increasingly prominent. Although some enterprises have purchase willingness, due to the inability of the supply side to guarantee stable shipments and the lack of clarity in downstream orders, smelters are exercising caution in procurement amid uncertainties on both the purchasing and sales sides. Actual market transactions remain sluggish, continuing a state of "price without market." Overall, the current export progress of cobalt intermediate products is slow, and the timeline for large-scale arrivals at ports may continue to be delayed. The structurally tight supply of domestic cobalt raw materials could further intensify. It is expected that after downstream orders gradually become clear post-holiday and smelters initiate a new round of procurement, intermediate product prices will still have upward momentum. Subsequent attention should be paid to the progress of DRC exports and the pace of downstream demand recovery. Cobalt Sulphate: This week marked the first trading week after the Chinese New Year. The spot cobalt sulphate market performed sluggishly overall, with prices remaining stable. In terms of supply, most smelters had just resumed operations, and market sentiment remained dominated by a wait-and-see attitude. Producers continued to suspend quotations, leading to relatively tight spot availability. On the demand side, logistics had not fully recovered in the first week after the holiday, and downstream enterprises also adopted a wait-and-see stance. Actual transactions were limited, and overall market activity was subdued. Looking ahead, logistics are expected to gradually return to normal after the Lantern Festival. Coupled with downstream enterprises' inventory levels pulling back to near safety thresholds, restocking demand is anticipated to be released gradually. Against the backdrop of phased supply tightening and sustained raw material cost support, cobalt sulphate prices are expected to resume an upward trend.

This week, lithium ore prices fluctuated upward in line with lithium carbonate. Supply side, overseas mines maintained a firm stance on prices, with offers remaining persistently high. The announcement by Zimbabwe's Ministry of Mines to immediately suspend all exports of raw ore and lithium concentrates also bolstered firm pricing sentiment in bulk lithium ore transactions to some extent; suppliers showed strong reluctance to sell, with most offers referenced backward from futures prices. Demand side, due to the continuous supply of raw materials and intense inquiry sentiment at current high levels, overall transactions remained relatively sluggish as both upstream and downstream participants adopted a wait-and-see approach amid recent significant price fluctuations; overall market transaction prices continued to rise in tandem with the lithium carbonate futures market.

[Post-holiday silicon metal market activity gradually recovers; focus on operating rate changes on both supply and demand sides]: During the first workweek after the Chinese New Year holiday, downstream users of silicon metal mainly inquired about prices, with only small volumes of rigid demand restocking transactions concluded. Trading firms engaging in both spot and futures market quoted prices actively, while silicon enterprises mostly maintained stable offers and adopted a wait-and-see stance compared to pre-holiday levels. As of February 26, SMM oxygen-blown #553 silicon in east China was at 9,200-9,300 yuan/mt, #441 silicon at 9,300-9,500 yuan/mt, and #3303 silicon at 10,200-10,400 yuan/mt. On the export front, overseas users showed active inquiry performance after the holiday, but export order prices remained involutionary. In the futures market, the most-traded contract weakened on Thursday afternoon, closing at 8,335 yuan/mt at the end of the session. Throughout the week, the most-traded contract moved within a range of 8,330-8,495 yuan/mt. Most silicon enterprises maintained strong wait-and-see sentiment with stable offers, while futures consolidated at lows and trading firms engaging in both spot and futures market quoted actively, resulting in on-demand transactions in the market.

[SMM Cast Aluminum Alloy Morning Comment: SHFE Aluminum Fluctuates at Highs, Post-Holiday Consumption Recovery Remains Slow] Spot side, A00 aluminum price rebounded by 140 yuan/mt to 23,520 yuan/mt compared with the previous trading day, while SMM ADC12 price rose slightly by 50 yuan/mt to 23,800 yuan/mt. Boosted by the stronger futures, market sentiment improved slightly. However, secondary aluminum enterprises remained generally cautious about following the upward trend, with most maintaining stable quotations or raising prices by no more than 100 yuan/mt. Post-holiday downstream consumption recovery pace was relatively slow, with downstream users making just-in-time procurement, and some enterprises still focusing on digesting inventories. Overall market transaction atmosphere was sluggish. In the short term, ADC12 price is likely to continue moving sideways in the initial post-holiday period. For the medium term, the trend still requires close monitoring of the supply-demand matching situation as production resumptions are gradually implemented, as well as the impact of primary aluminum price movements on aluminum scrap costs.