SMM Analysis: In H1 2026, the core operating logic of China’s copper anode market can be summarized as follows: overseas project startups drove a recovery in imports, but the tightening of domestic secondary copper policies rapidly shifted the supply-demand pattern from a surplus in Q1 to tightening in Q2...

In H1 2026, driven by the resonance of multiple demands from new energy, AI computing power, and consumer electronics, China's copper foil industry continued the high prosperity trend that began in Q4 2025. The overall industry presented a pattern of rising volumes and prices and supply-demand tightness. 1. Capacity utilization rate continued to rise, with a supply gap in high-end categories On the supply-demand side, in H1 the industry's operating rate operated at high levels overall, steadily climbing from 88.56% at the start of the year to over 91% by the end of Q2, consistently holding above the 90% mark. Demand for both lithium battery copper foil and electronic circuit copper foil strengthened simultaneously. Benefiting from the intensive roll-out of local energy storage subsidies and the rising penetration rate of NEVs in H1, power batteries maintained a high production schedule pace. Coupled with the concentrated installation rush before the "630" grid connection for energy storage, the incremental growth in demand for lithium battery copper foil was pronounced. Meanwhile, AI computing centers and 5G/6G communication equipment boosted the rapid volume growth in demand for high-end electronic copper foils such as RTF and HVLP series, driving the conversion of ordinary capacity to high-end. Consequently, a supply gap emerged in traditional electronic circuit copper foil. Moreover, against the backdrop of optimistic end-use demand and the fact that new capacity release still requires time, SMM expects that China's lithium battery copper foil supply and demand for the full year 2026 will present a slight shortage pattern. 2. Processing fees rose across the board, with the industry's profitability continuing to recover. On the price side, benefiting from supply-demand tightness, copper foil processing fees for all specifications climbed steadily. As of the end of June 2026, mainstream specification processing fees rose comprehensively compared to the start of the year: the 4.5μm lithium battery copper foil processing fee was raised by 1,000 yuan/mt to 27,000 yuan/mt; the 6μm lithium battery copper foil processing fee was raised by 2,000 yuan/mt to 21,000 yuan/mt; and the 18μm HTE copper foil processing fee rose by 3,000 yuan/mt to 21,000 yuan/mt. The rise in processing fees effectively offset cost pressure from raw material price fluctuations, strengthening the industry's profitability resilience. 3. Exports surged significantly, with the trade structure continuing to improve. Import and export, in H1 China's copper foil exports continued to surge. From January to May 2026, China's cumulative copper foil exports were 32,000 mt, surging 71.79% YoY, with new monthly highs set in March and April. The main export destinations were Thailand, South Korea, Malaysia, etc. On the import side, growth slowed down significantly; from January to May 2026, cumulative imports were 36,600 mt, up only 7.63% YoY, while imports in May fell both YoY and MoM. Domestic substitution for low and mid-end products continued to advance, but high-end HVLP series products still rely on imports from Taiwan, China, and Japan, leaving ample room for domestic substitution. The industry's trade deficit narrowed significantly from $103.14 million at the start of the year to $45.9 million in May. IV. H2 Market Outlook: The upcycle extends, with a tight supply-demand balance supporting high processing fees. Looking ahead to H2, high industry prosperity is expected to continue. On the demand side, policies supporting energy storage and digital infrastructure under the 15th Five-Year Plan will continue to be implemented, and, coupled with the advancement of renewable energy targets outside China, incremental growth potential remains. Meanwhile, the NEV penetration rate will keep rising, and seasonal strength in AI, 5G/6G, and consumer electronics will become more pronounced. On the supply side, most enterprises are currently running near full production schedules. If new capacity ramp-ups fall short of expectations, the supply-demand gap for lithium battery copper foil could widen further in Q3 and Q4, supporting processing fees at high levels. Regarding imports and exports, Japanese and Taiwan, China enterprises are accelerating their switch to high-end electronic copper foil capacity, providing Chinese domestic enterprises with ongoing export opportunities in the mid-end market. Annual exports are expected to hit a record high, and the trade deficit will continue its narrowing trend.

[SMM Analysis: H1 2026 Review of the Overseas Copper Scrap Market: Copper Prices Surge, Tight Raw Material Supply Supports Firm Discount] In Q1 2026, copper prices stayed high and consolidated around $13,000/mt. It was not until late Q1 that a short-term correction emerged, but prices resumed their uptrend in Q2 and continued to hit new record highs. Behind this, tight copper ore supply provided support on one hand; on the other, the siphon effect on global copper resources triggered by US tariff expectations further amplified market concerns over the supply side. At the same time, rapid growth in new copper-consuming sectors such as NEVs, new energy power, power grid construction, and data centers fueled rising expectations for copper demand. Against the backdrop of supply growth failing to match demand growth, copper prices received strong support. The tight supply of copper units also prompted enterprises to shift their focus from the ore side to supplementary sources beyond mine supply, with copper scrap gaining noticeably in importance. As copper prices continued to surge, copper scrap prices rose in tandem, while structural changes arising from copper resource scarcity began to alter the pricing logic of the copper scrap market, which had previously been dominated by consumption and price differentials.

In H1 2026, China's enamelled wire industry overall exhibited a phased pattern of 'post-holiday rebound and surge, followed by a steady pullback in Q2,' with its operational characteristics heavily focused on structural differentiation.

I. Full Review of Copper Billet Industry in H1 2026 (I) Policy Side: Strict Control of Reverse Invoicing, Long-Term Restriction on Recycled Raw Material Circulation In H1, fiscal and tax supervision became the core underlying constraint weighing on the copper billet industry. The reverse invoicing policy for recycled resources entered a phase of normalized, high-pressure implementation; natural-person individual sellers had an annual invoicing quota of 5 million yuan, which significantly narrowed circulation channels for domestic unticketed scrap brass. Grassroots recyclers showed low willingness to sell, leading to a persistent shortage of compliant domestic sources of secondary brass. During the policy transition period, corporate compliance costs rose notably. Small and medium-sized processing plants, lacking channels for stable raw materials with invoices, were forced to proactively cut production and undertake maintenance to avoid risks. Large top-tier players leveraged their international trade qualifications and stable import sources to buffer the raw material gap, accelerating the concentration of industry capacity toward compliant large-scale enterprises. The No. 770 policy on secondary copper tax rebates continued to tighten, completely compressing the grey circulation space in the industry. The contradiction of raw materials "having the goods but no invoices available, with invoiced goods at high prices" pervaded the entire H1 cycle. (II) Raw Materials and Imports/Exports: Domestic Secondary Supply Contracted, Premiums on Imported Secondary Brass Rose 1. Domestic Raw Material Bottleneck Intensified The compliant circulation volume of domestic scrap brass fell sharply YoY, weakening the cost advantages of secondary brass over copper cathode. Most brass billet plants faced difficulties in raw material procurement and high credit costs, and with the natural-person quota ceiling constraint, supply could hardly return to the level seen in previous years. Meanwhile, speculation in the brass scrap market further drove up prices, and copper-zinc separation operations raised overall raw material costs. 2. Imported Cargo Became a Mainstream Supplement, but Costs Continued to Rise Domestic enterprises turned to bulk purchasing of imported secondary brass with invoices. In H1, imports of secondary brass maintained YoY growth, however, overseas scrap copper export policy uncertainties and rising international copper prices pushed up procurement premiums. Available overseas scrap brass supply tightened, and import procurement coefficients continued to climb, further raising raw material costs for brass billet. Data Source: SMM From January to May, cumulative imports of brass billet in China were approximately 11,400 mt, down 1.23% YoY, but the cumulative import value reached $105.7079 million, up 23.42% YoY, highlighting a pattern of shrinking volume and rising prices. In terms of import sources, in May, South Korea remained the largest source country (accounting for approximately 40%), with Japan second (at approximately 16%), showing initial signs of regional diversification. (III) Costs and Prices: Copper Prices Swung Wildly at Highs, Industry RC Continued to Decline In H1 2026, copper cathode prices showed a pattern of "retreating after a rapid rise and consolidating at highs." Prices hit an annual peak in January and fell to a periodic low in March. In Q2, the price center stabilized above 100,000 yuan/mt, with the annual average price rising sharply YoY, directly lifting raw material costs for copper billet. As of end-June, the average spot price of Hpb59-1 brass billet in the Zhejiang region had climbed to a historical high of 70,650 yuan/mt. Price transmission had significant blockages: traditional downstream brass demand was sluggish, with end-users possessing strong bargaining power, so raw material price increases could not be smoothly transferred downstream. The industry exhibited a typical pressured pattern of "rising prices with weak volume." From April to May, the overall profitability pressure on the industry climbed to its worst level in the past two to three years. High-precision copper billet used in new energy and AI applications saw stronger RC resilience due to technical barriers and stable rigid demand, making it the only sub-category with relatively stable profits in H1. Coupled with rising logistics, tax, and capital occupation costs, most small and medium-sized brass billet enterprises remained in a state of meager profit or even losses over the long term. (IV) Supply and Demand: Demand Severely Polarized, Operating Rates Stayed Low 1. Supply Side: Operating Rate Weakened Month by Month, Enterprise Polarization Significant The overall copper billet operating rate drifted lower in H1, continuously falling back from 50.86% in January to 46.09% in June, with declines seen both YoY and MoM. The gap in capacity polarization continued to widen: large enterprises with stable raw material channels saw a 52.6% operating rate in June; medium-sized enterprises, squeezed by both raw materials and orders, operated at only 38.76%; small processing plants, facing raw material shortages and order scarcity, saw operating rates fall to 23.44%, intensifying industry polarization. Raw material constraints were the core supply-side constraint; coupled with losses forcing enterprises to control production, the overall industry capacity utilization rate remained in a historically low range in H1. 2. Demand Side: Traditional Sectors Weakened Deeply, Emerging Sectors Strengthened Independently Traditional brass demand (air conditioning, plumbing, valves, general hardware) remained persistently weak in H1. The downturn in the post-property cycle, combined with an early off-season for home appliances, saw downstream users purchasing as needed without concentrated restocking. Meanwhile, the substitution penetration rate of stainless steel in air conditioning parts continued to rise, continuously diverting rigid demand from brass, and brass billet orders shrank month by month. Data Source: SMM Structural demand support was concentrated in the copper billet segment: the three electric systems (power battery, drive motor, and electronic control system) of NEVs, large-power charging piles, energy storage PCS, AI server GPU cooling, and precision pins for optical modules continuously released stable rigid demand. Orders for high-purity oxygen-free copper billet were full, partially offsetting the overall decline in industry demand. However, with copper billet capacity accounting for a limited share, this was not enough to boost the brass segment's recovery. II. Market Outlook for Copper Billet Industry in H2 2026 In Q3, the industry is expected to be under pressure and hit bottom. The traditional off-season, coupled with high temperatures suppressing end-user procurement and the ongoing impact of stainless steel substitution, is expected to weigh on brass demand. SMM expects the overall copper billet operating rate to continue falling to 43.65% in July, hitting an annual low. Policy-side reverse invoicing supervision is unlikely to ease, capping the compliant supply of domestic scrap brass. Combined with continuously tightening controls on overseas scrap copper exports, the pattern of high premiums on imported secondary brass is expected to persist. The raw material bottleneck is set to run through the off-season. Brass billet is anticipated to be dragged down by the triple headwinds of the off-season, substitution, and low RCs, with profitability under sustained pressure in Q3. Only the continued commissioning of NEV and AI computing infrastructure projects is likely to bring rigid demand orders for copper billet, forming the sole demand support. In Q4, prosperity is expected to recover on a QoQ basis. As home appliances and plumbing enter their traditional stockpiling peak season, brass billet orders are expected to rebound MoM. Combined with year-end push for annual targets in PV, energy storage, and NEVs, demand for copper billet is expected to further strengthen, with industry operating rates and transactions both recovering. However, copper cathode prices are highly likely to continue consolidating at highs, with the raw material cost center stay high, putting cost pressure on processing enterprises throughout the year. In the medium and long term, the traditional brass demand center is expected to decline year by year, while AI computing, new energy, and energy storage constitute the core growth drivers of the copper billet industry. Small and medium-sized outdated capacity is expected to continuously exit the market, while top-tier players are simultaneously laying out high-end copper billet capacity. The three major thresholds of raw materials, orders, and compliance continue to widen the gap between enterprises, making the industry's transformation towards scale, compliance, and high-end manufacturing an irreversible trend. In summary: In H1 2026, the core contradictions in the copper billet industry were supply shortages caused by tightening recycled raw material policies, weakening traditional end-use demand, and the squeezing of processing profits by high copper prices. The industry relied on new energy and AI copper billet for structural support, maintaining a generally weak operating environment. In H2, the market is expected to show a pattern of initial weakness followed by later strength: in Q3, the triple negative resonance of the off-season, raw materials, and substitution is expected to keep operating rates and profitability under sustained pressure; in Q4, the combination of the traditional end-user peak season and continuously increasing volumes from emerging sectors is expected to repair industry prosperity on a QoQ basis. In the medium and long term, the reverse invoicing policy is reshaping the secondary copper circulation system, accelerating market clearing. High-precision copper billet for new energy and AI computing infrastructure is expected to become the core future growth line for the copper billet industry.

[2026 Copper Plate/Sheet and Strip Semiannual Review and Outlook: H1 Operating Rate Hits a Five-Year High for the Same Period, Emerging Sectors Underpin Industry Resilience] In H1 2026, after experiencing wild swings in copper prices at the start of the year and the seasonal shutdown during the Chinese New Year, China's copper plate/sheet and strip industry entered a rapid recovery path from March onward, presenting an overall...

[SMM Shanghai Spot Copper] Looking ahead to tomorrow, according to the Central Meteorological Observatory, this year's No. 9 typhoon "Bawei" has strengthened into a super typhoon. It is expected to approach the eastern sea areas of China around July 10, with a high probability of making landfall in east China. Affected by this, downstream copper semis processing plants in Jiangsu and Zhejiang are concerned that subsequent strong winds and rainstorms from the typhoon could disrupt logistics and production arrangements. They are therefore concentrating on advance stockpiling purchases, pushing up the overall center of Shanghai spot copper premiums. Observing supplier behavior, market transactions were active, and after low-priced cargoes were quickly absorbed, suppliers' willingness to hold prices firm further strengthened. Overall, under the combined effect of the concentrated release of typhoon stockpiling demand, suppliers holding prices firm, and continuous inventory destocking, Shanghai spot copper prices against the SHFE copper 2607 contract are expected to remain at a premium tomorrow, with the overall center continuing to edge up.

SMM July 7th At 11:30 AM today, the futures closing price was 102,980 yuan/mt, down 130 yuan/mt from the previous trading day. The average spot premium was 110 yuan/mt, up 30 yuan/mt from the previous trading day. Today, secondary copper raw material prices remained flat compared to the previous trading day. The secondary copper raw material sales sentiment index fell to 2.3, and the purchasing sentiment index fell to 2.38. The price difference between copper cathode and copper scrap was 1,693 yuan/mt, down 100 yuan/mt from the previous trading day. The price difference between copper cathode rod and secondary copper rod was 630 yuan/mt. According to the SMM survey, copper prices consolidated. During the day, both the purchasing and sales sentiment indices for the secondary copper raw material market declined. As the consumption off-season set in, high secondary copper raw material prices made many secondary copper rod enterprises unwilling to purchase. The price difference between copper cathode rod and secondary copper rod was hard to widen due to high raw material prices, and end-use consumption remained sluggish.

[SMM Brass Billet Flash] Based on frontline survey feedback from a sample of copper billet enterprises nationwide, market expectations for the industry's performance in July are generally pessimistic. Near-term improvement drivers remain insufficient, and multiple negative factors will continue to ferment. SMM expects the comprehensive operating rate of China's copper billet producers to pull back 2.44 percentage points MoM to 43.65% in July, down 1.17 percentage points YoY. The industry's low-level operation trend is expected to continue.

[SMM Brass Billet Flash] According to SMM, the current demand structure exhibits a notable divergence: orders for traditional brass products continue to weaken, while demand for high-purity copper billets provides a strong offset. NEV three electric systems (power battery, drive motor and electronic control system), large power charging piles, Power Conversion System (PCS), and parts such as AI servers, GPU cooling modules, and precision pins for optical modules persistently release steady rigid demand, keeping orders stable for copper billet enterprises and making this the only segment in the industry with demand resilience.