Ahead of Q2, the tensions across China’s NEV supply chain had already become increasingly visible in February and March. On the one hand, battery output remained resilient, supported by OEM volume targets and the new-model cycle; on the other hand, lithium salts and certain battery materials rebounded into a sensitive range, repeatedly interrupting any meaningful profit recovery for both OEMs and battery manufacturers. As a result, the market’s focus for Q2 has shifted: it is no longer just about whether sales can grow, but whether demand can deliver and whether margins can hold up under high costs and supply-side disruptions. The key feature from late February to early March was an optically strong demand profile driven by the combination of post-holiday ramp-up and front-loaded orders (including some rush-to-export activity, although the overall volume was limited). After the Lunar New Year, both automakers and battery makers restored production quickly. Together with certain OEMs maintaining their Q1 sales push, the chain saw a relatively aggressive inventory build. Orders during this period reflected a mix of recovery and tactical behavior: partly to fill the delivery gap created by the holiday, and partly to pre-position capacity and materials ahead of April’s new model launches and major auto show catalysts. Therefore, the strength observed at that time should not be interpreted as a confirmed inflection in full-year demand; it was more a forward shift in timing. In the lithium market, such periods tend to reinforce “demand is recovering” narratives, amplifying price sensitivity to expectations. In March, the narrative shifted from volume after ramp-up to whether higher costs could be passed through and whether orders could remain sustainable. With broad-based upstream cost inflation, battery pricing began to diverge based on contracting mechanisms. Cell makers using formula-linked pricing were more able to pass through costs—at least from a financial/accounting perspective—while those locked into fixed “all-in” pricing faced more pronounced margin compression. Many suppliers chose not to push price negotiations to the limit in Q1, instead postponing intensive renegotiations to the post-holiday window. The result is that the industry still appeared to be producing and delivering in March, but profit pressure accumulated within the chain—the core contradiction did not disappear, it was simply deferred. Accordingly, market expectations for Q2 started to diverge: optimists focused on the new-model cycle and resilient production schedules, while more cautious participants emphasized that if sales do not deliver, margins will be the first to deteriorate. Against this backdrop—before the cost-versus-margin tension had been resolved—supply-side disruptions further increased uncertainty. Zimbabwe’s Ministry of Mines announced a suspension of raw ore and lithium concentrate exports (including in-transit cargo), tightened export eligibility and compliance requirements, and signaled a longer-term policy direction toward domestic processing, with an in principle plan to ban concentrate exports by 2027. For the market, the impact of such events is rarely about immediate tonnage loss. It typically works through two channels: first, it undermines confidence in supply-chain stability, making it easier for a risk premium to be priced into lithium; second, it changes behavior across traders and downstream buyers—encouraging earlier locking-in and precautionary stocking during periods of heightened price sensitivity, thereby amplifying short-term volatility. The time lag is also critical: shipping from Zimbabwe to Chinese ports typically takes 2–3 months, so even if export flows are disrupted, the market’s physical perception is more likely to emerge after April. This creates a unique Q2 setup: the market must simultaneously validate whether sales can deliver in April–May while also facing the potential for supply timing disruptions in raw materials. On the demand side, the validation window is concentrated in April–May. The Beijing Auto Show and a dense pipeline of new model launches provide a short-term catalyst for end-market demand—one reason why OEMs have generally “gritted their teeth” to build inventory and keep production schedules elevated despite rising costs. However, the key question is not how many models are launched, but whether new products can translate into a sustained sales uptrend. If April–May sales significantly exceed expectations, the chain may enter a positive feedback loop: better deliveries would accelerate channel inventory depletion, improve OEM inventory turnover, and incentivize automakers to maintain higher production levels—supporting sustained power battery orders. At the same time, lithium inventories would be consumed faster, making prices easier to hold. In this scenario, Q2 would be interpreted as demand confirmation, improving risk appetite across the market. If, however, April–May sales are merely average, the downside dynamics become more pronounced. A portion of current production and inventory build is expectation-driven and front-loaded; if sales do not deliver, OEMs are more likely to cut schedules in May–June to correct inventories. With costs still elevated, automakers will tend to push pressure upstream to protect their end-market competitiveness, leaving cell makers—especially those with a high share of fixed-price contracts—more exposed. In other words, the biggest risk in Q2 is not weak sales alone, but the combination of weak sales and high costs, which can trigger margin compression and order contraction and rapidly shift market sentiment from recovery expectations to confirmed weakness. The energy storage segment’s ability to serve as a buffer for power batteries also needs to be re-evaluated in a Q2 framework. Current storage project pipelines in April–May remain relatively solid, and overseas orders are stable, which can partially smooth utilization volatility for cell makers. However, if lithium carbonate prices stay high, project IRRs will be squeezed—especially for price-sensitive projects or those with strict grid-connection timelines—raising the risk of delayed commissioning. If storage timelines slip while power-side demand fails to meet expectations, cell makers could face a phase where neither demand driver provides strong support, materially shaping market views for the second half of Q2. Overall, incorporating March into the picture makes the Q2 validation logic clearer. In March, OEMs were both pushing volumes and building inventory ahead of new models, naturally lifting cell demand, while rising costs and delayed price pass-through accumulated margin stress. Meanwhile, supply-side disruptions (such as Zimbabwe) pushed raw-material uncertainty into the post-April window. Ultimately, Q2 is not about a single variable, but whether three conditions can hold simultaneously: (1) sales can remain consistently above expectations, (2) costs can stay relatively stable, and (3) supply disruptions prove to be more sentiment-driven than a true physical contraction. If any one of these fails, the market is more likely to see amplified volatility rather than a trend-level reversal.

Futures: Overnight, LME lead opened at $1,965/mt, fluctuating downward during the Asian session; it dipped to $1,948.5/mt upon entering the European session, but then rose due to a weakening US dollar index, touching a high of $1,976.5/mt before finally settling at $1,974.5/mt. Overnight, the most-traded SHFE lead 2603 contract opened at 16,665 yuan/mt, briefly touched a low of 16,560 yuan/mt early in the session, then rebounded as bears reduced positions, reaching a high of 16,680 yuan/mt before finally settling at 16,665 yuan/mt, up 0.48%, forming a doji star. On the macro front: As markets awaited a series of US economic data, a weaker US dollar made dollar-denominated commodities more attractive to overseas buyers; spot gold extended gains. The White House's Hassett predicted worsening employment: AI boosts productivity, reduces labor demand. Alphabet planned to raise about $15 billion by issuing US dollar bonds. China's Ministry of Commerce held a symposium with automakers: Multiple measures to promote the expansion and quality improvement of auto consumption. The Shanghai, Shenzhen, and Beijing Stock Exchanges announced a package of measures to optimize refinancing. Seven departments including the Ministry of Human Resources and Social Security provided administrative guidance on employment to leading platform companies and courier firms. Three departments including the Ministry of Finance issued an announcement on tax incentives for re-exported cross-border e-commerce goods. : SHFE lead stopped falling and stabilized, but as the Chinese New Year holiday approached, logistics vehicles halted in some regions, leading to reduced shipments and quotations from suppliers. Only some cargoes self-picked up from primary lead smelters were quoted at premiums of 0-50 yuan/mt against the SMM #1 lead average price ex-works. In the secondary lead sector, more smelters were on holiday and reluctant to sell at low prices, with most enterprises suspending quotations; a few secondary refined lead offers were at discounts of 25 yuan/mt to premiums of 50 yuan/mt against the SMM #1 lead average price ex-works. Downstream enterprises generally entered the year-end wrap-up phase, with minimal inquiries, resulting in thin trading in the spot market. Inventory: On February 9, LME lead inventory decreased by 100 mt to 232,750 mt. As of February 9, SMM lead ingot social inventory across five regions rose to a five-month high. Today's lead price forecast: With previously in-transit lead ingots by rail concentratedly arriving at warehouses, social inventory of lead ingots increased significantly, mainly reflected in Jiangsu and Zhejiang region warehouses. Last week, lead prices fell, prompting lead-acid battery enterprises to conduct relatively concentrated stockpiling of lead ingots, leading to a noticeable decline in lead smelters' in-factory inventory. This week being the last before the Chinese New Year, the final batch of lead-acid battery enterprises will enter the holiday state, further weakening lead consumption. Meanwhile, with the start of the Spring Festival travel season, migrant workers have returned to their hometowns, and the number of vehicles in operation has gradually decreased. Currently, some regions no longer support road transportation. It is expected that the growth momentum of social inventory for lead ingots will slow down, and the inventory buildup of lead ingots is anticipated to be more reflected in the smelters' plant inventories. Overall, lead prices are in the doldrums ahead of the holiday. Data Source Statement: Except for publicly available information, other data are processed by SMM based on public information, market communication, and SMM's internal database model, for reference only and do not constitute decision-making advice.

Silver prices were in the doldrums during the morning session today, as suppliers slightly lowered their premium quotes and showed less willingness to hold prices firm compared to yesterday. In Shanghai, suppliers of national standard silver ingots quoted premiums of 1,500-1,800 yuan/kg against TD for rigid demand transactions, while suppliers of large-smelter silver ingots held prices firm with premiums of 1,700-1,900 yuan/kg against TD, reluctant to sell. After inventory declines at smelters in Jiangxi, Guangdong, Henan, and other regions, they adopted a wait-and-see attitude, quoting premiums of 1,800-2,000 yuan/kg against TD. Spot market availability increased slightly today, but a few large-smelter silver ingot brands remained scarce, commanding a premium of 100-200 yuan/kg compared to ordinary national standard silver ingots. Downstream users engaged in buying the dip for rigid demand, leading to improved market transaction activity compared to yesterday.

As of Thursday this week, the SMM battery-grade nickel sulphate index price was 31,813 yuan/mt, the quotation range for battery-grade nickel sulphate was 31,570-33,000 yuan/mt, and the average price rose compared to pre-holiday levels.

On February 26, the SMM battery-grade nickel sulphate index price was 31,813 yuan/mt, with the quotation range for battery-grade nickel sulphate at 31,570-33,000 yuan/mt, and the average price increased slightly compared to the previous day.

[SMM Zinc Morning Meeting Minutes: LME Zinc Ingot Inventory Remains Low, LME Zinc Fluctuates at Highs] Overnight, LME zinc opened at $3,387.5/mt, fluctuated upward after opening, touched a high of $3,416.5/mt, then pulled back all the way, approaching the end of the session, LME zinc touched a low of $3,362.5/mt, then rebounded from the low to near the daily average line, and finally closed down at $3,387/mt...

[SMM Aluminum Morning Meeting Minutes: Macro Front Sees Mixed Sentiments, Aluminum Ingot Inventory Accumulation Caps Price Upside Room] Fundamental seasonal weakening pressure becomes more pronounced. Supply side, domestic and overseas aluminum new projects steadily ramp up production. Demand side, attention should be paid to the pace of downstream enterprise resumption after the holiday. Currently, under the influence of seasonal supply exceeding demand, the market generally expects the post-holiday inventory peak to reach 1.3 million mt, hitting a five-year high, which will be the core factor suppressing prices. Overall, aluminum prices are expected to move sideways in the short term.

SMM February 26: Today, spot prices of #1 copper cathode in Guangdong against the front-month contract were at a discount of 270-100 yuan/mt, with the average discount at 185 yuan/mt, up 35 yuan/mt from yesterday. SX-EW copper was quoted at a discount of 350-310 yuan/mt, with the average discount at 330 yuan/mt, up 50 yuan/mt from the previous trading day. The average price of #1 copper cathode in Guangdong was 102,185 yuan/mt, up 260 yuan/mt from the previous trading day, while the average price of SX-EW copper was 102,040 yuan/mt, up 275 yuan/mt from the previous trading day. Spot market: Guangdong inventory continued to increase today, but the growth rate slowed down compared to yesterday. However, inventory is expected to peak next week. As more downstream users resumed production, procurement volume also increased. Suppliers actively held prices firm and made shipments, pushing spot premiums higher. Today, procurement sentiment for copper cathode in Guangdong was 2.42, up 0.17 from the previous trading day, while shipment sentiment was 3.05, up 0.05 from the previous trading day (historical data can be queried in the database). As of 11:00, high-quality copper against the front-month contract was quoted at a discount of 100 yuan/mt, standard-quality copper at a discount of 270 yuan/mt, and SX-EW copper at a discount of 330 yuan/mt. Overall, as downstream production resumed, procurement volume increased accordingly. Suppliers actively held prices firm and made shipments, leading to continued improvement in overall trading activity.

[SMM Tin Morning Brief: SHFE Tin Most-Traded Contract Hovered at Highs in Night Session, Downstream Enterprises Adopted Wait-and-See Sentiment Toward High Prices]

[SMM Zinc Morning Comment: Downstream Yet to Fully Resume Work, SHFE Zinc Maintains Fluctuating Trend] Overnight, the most-traded SHFE zinc 2604 contract opened at 24,590 yuan/mt. After opening, it briefly fluctuated downward, hitting a low of 24,550 yuan/mt before rebounding and reaching a high of 24,715 yuan/mt towards the close. It finally closed down at 24,675 yuan/mt, falling 35 yuan/mt or 0.14%, with trading volume decreasing to 39,861 lots.