Against the backdrop of aluminum price premiums being given back and heightened expectations of decline, end-users' willingness to restock will remain suppressed. Industry profit margins are expected to stay low, and competition among enterprises will evolve deeply from "scale expansion" to "cost control and structural optimization."

SMM July 10: Futures markets surged again today, intensifying pressure on spot aluminum in South China. As the weekend approached, higher absolute prices spurred outright holders to increase shipments and monetize, with many downward adjustments causing significant impact; hedged cargo intended to hold prices firm but was dragged down and passively followed suit, with mainstream quotations a discount of 20-10 yuan/mt, supply appearing even more abundant, and in fact, no shortage of even cheaper cargo. On the demand side, downstream buyers’ purchasing appetite was mediocre given the high prices, only pushing for lower prices and buying the bare minimum; traders remained on the sidelines, largely unwilling to enter the market to purchase. Overall demand was at a relative trough, resulting in dismal overall trading. Spot transaction prices were concentrated at a premium of 10-50 yuan/mt against the SHFE aluminum 2607 contract.

SMM, July 10: This week, cobalt market product prices continued to consolidate on a weak note. Although refined cobalt prices edged up by 2,000 yuan/mt, end-use demand showed no substantial improvement, and the recovery of downstream demand remains the eagerly anticipated future for the entire cobalt industry chain. Looking back at refined cobalt prices in H1 2026, despite the drag from weak downstream demand performance, the overall price center still rose significantly compared with the same period in 2025, with a YoY surge of as much as 97.22%........ SMM has compiled the price changes of cobalt series products this week and the price review of the cobalt market in H1, as follows: : According to SMM spot price data, refined cobalt spot prices edged up this week. As of July 10, spot refined cobalt prices rose to 380,000-387,000 yuan/mt, with an average price of 383,500 yuan/mt, up by 2,000 yuan/mt from 381,500 yuan/mt on July 3, an increase of 0.52%. 》View SMM cobalt and lithium spot prices Supply side, mainstream smelters slightly raised EXW prices to 390,000 yuan/mt; trader spot-futures price spreads remained in the range of parity to a premium of 10,000 yuan/mt. Demand side, downstream changes were not significant this week, with most enterprises maintaining restocking for rigid demand, and end-use demand had not yet shown substantial improvement. In the short term, with relatively weak downstream support and high industry inventory, refined cobalt prices are likely to mainly consolidate; however, for refined cobalt prices to enter a recovery path, they still depend on the upward momentum of upstream categories such as cobalt intermediate products and cobalt sulphate. Cobalt Salt ( and ): : According to SMM spot price data, cobalt sulphate spot prices remained in the doldrums this week. As of July 10, spot cobalt sulphate prices fell to 84,200-86,000 yuan/mt, with an average price of 85,100 yuan/mt, down by 900 yuan/mt from July 3, a drop of 1.05%. 》View SMM cobalt and lithium spot prices According to SMM, trading in the cobalt sulphate market remained sluggish this week, and prices returned to a weak, grinding lower trend. Supply side, quotations from primary smelters remained firm, with mainstream enterprises continuing to hold the 85,000 yuan/mt level; however, some recycled-material smelters lowered their offers again to promote shipments, and the lowest offer in the market has now fallen back to 80,000-81,000 yuan/mt. Demand side showed no significant improvement, downstream enterprises mostly scheduled production pace based on orders, and product settlements generally referenced monthly average prices. To avoid risks from spot purchase-sales price spreads, most enterprises mainly adopted a wait-and-see approach at the beginning of the month, and restocking activities will likely take place after mid-to-late July, or possibly be postponed to August. Recently, a few companies had low inventory and intended to restock, but their psychological price level was below 80,000 yuan/mt, limiting actual completion. In the short term, the cobalt sulphate price is expected to consolidate on a subdued note, and sustained recovery in the market will depend on the realization of downstream concentrated restocking demand. side: According to SMM spot price data, spot cobalt chloride quotations edged down 250 yuan/mt early in the week and then held steady. As of July 10, spot cobalt chloride was quoted steady at 102,000–104,000 yuan/mt, averaging 103,000 yuan/mt, down 0.24% from July 3. In the spot market, according to SMM, the cobalt chloride market remained sluggish this week. Inquiry activity improved slightly from the prior period, but actual concluded deals were still very limited. On the supply side, smelter quotations were broadly stable, but with no sizeable transactions, current offer prices mainly reflected seller sentiment, and their actual reference value remained to be verified. On the demand side, the “rush to buy amid continuous price rise and hold back amid price downturn” mentality continued to dominate. Downstream buyers were still assessing whether the current price plateau was a brief pause or a stage bottom, and their willingness to enter the market was low, with an overall wait-and-see sentiment remaining strong. In the short term, cobalt chloride prices are likely to move sideways, with limited downside room. side: According to SMM spot price data, spot Co3O4 quotations also stabilized temporarily after a decline on the first trading day this week. As of July 10, spot Co3O4 was quoted steady at 310,000–330,000 yuan/mt, averaging 320,000 yuan/mt, down 2,500 yuan/mt or 0.78% from July 3. From the spot market perspective, the Co3O4 market continued to be sluggish this week, and actual deals remained scarce. On the supply side, after the half-year mark, previously bearish enterprises had largely completed destocking, easing the pressure from concentrated sell-offs, and quotations stabilized. On the demand side, although downstream cathode material plants had a procurement window, during the period of continued price consolidation at lows, they were still mainly pressing for lower prices and restocking only small volumes on demand, with little willingness to increase purchases. The sluggish market continued to weigh on upstream shipment pace. In the short term, the Co3O4 price trend will remain anchored to the cobalt salt segment price direction and is expected to mainly move sideways in line with cobalt chloride. On the news front, the first half of 2026 has concluded. Reviewing the cobalt market performance in H1, although refined cobalt prices were dragged down by weak downstream demand, due to the impact of a series of measures such as the DRC's cobalt export ban previously, refined cobalt prices overall remained fluctuating at relatively high levels over the past three years. According to SMM historical prices, in H1 2026, the average spot price of refined cobalt was 424,325.43 yuan/mt, up by 209,170.73 yuan/mt or 97.22% from 215,154.7 yuan/mt in H1 2025. On a monthly basis: In January 2026, affected by profit-taking, weakening macro sentiment, and the drag from declining other metals, refined cobalt prices retreated after a rapid rise and then stabilized at relatively low levels for a long period. Supported by strong raw material costs, other cobalt products, while not declining in price, lacked upward momentum and entered a stable state. During the Chinese New Year period, affected by various bullish news, refined cobalt prices briefly rebounded; however, subsequently, under the influence of domestic and international arbitrage, low downstream stockpiling demand, and capital suppression, prices continued to grind lower, returning to low levels. End-users operated with low inventories, making just-in-time procurement only. The cobalt salt market remained divided, with upstream holders expecting price rises and unwilling to sell at lower prices, while only enterprises under capital pressure cut prices to sell. Downstream buyers were unwilling to purchase at high prices without orders, leaving the market sluggish. Prices overall remained stable. From April to May, downstream production schedules and orders fell short of market expectations. Coupled with most enterprises having relatively ample raw material inventories, purchase willingness was weak, with only small-volume procurement of low-priced raw materials. On the supply side, although the vast majority of smelters held prices firm due to high raw material cost support, some recycling smelters and traders, under capital pressure, sold at discounts, causing prices to slowly grind lower overall. Entering June 2026, the cobalt market continued to grind lower, with the price centers of various products moving further down. End-use demand for refined cobalt remained weak, and combined with some enterprises facing capital and financial report pressures, they continued to sell off in spot and futures markets, putting prices under pressure. The cobalt salt segment was affected by weakening production schedules for downstream ternary cathode precursors and Co3O4, with procurement remaining just-in-time and pushing for lower prices, causing transaction centers to continue declining. Cobalt intermediate products edged lower in the tug-of-war between miners holding prices firm and domestic smelters' subdued purchases, with a smaller decline than cobalt salts, further compressing smelting margins. Overall, the strategic supply-demand stalemate persisted: upstream cost support clashed with downstream pressure for lower prices, and some enterprises, pressured by mid-year financial reports and capital, cut prices to sell, further dragging down the market. Looking ahead to July, in the short term, downstream demand is expected to remain weak, and the high inventories still present in the market will constrain price increases. Prices may consolidate at low levels, with some speculative traders possibly selling off and exiting due to low prices. However, if other cobalt products rise, refined cobalt prices could also follow suit and increase. For more insights into the cobalt market, check out the , released by SMM in the first ten days of each month. SMM will also publish a review of the 2026 H1 cobalt market and an outlook for H2—stay tuned!

[SMM Analysis: H1 2026 Secondary Copper Rod Market Semi-Annual Report: Compliance Reshapes Pricing Logic, Supply-Demand Standoff Throughout] In H1 2026, the secondary copper rod market completely broke away from the traditional pricing framework of "copper prices – supply and demand." It was primarily impacted by the dual policy shocks of "reverse invoicing" moving from transitional verification to full implementation and the clearance of local irregular fiscal and tax incentives (Document No. 770), coupled with wide fluctuations as the most-traded SHFE copper contract retreated from the record high of 113,800 yuan/mt at the start of the year and consistently held the threshold of 100,000 yuan/mt in mid-year. The entire industry found itself in a deep stalemate characterized by "policies setting the structure, invoices locking in transactions, and copper prices setting the pace," with the operating rate plunging sharply YoY, and enterprises generally walking a tightrope between compliance pressure and weak demand.....

[SMM Analysis] In H1, the overflow of global utility-scale energy storage long-term contracts intertwined with the growing pains of production line upgrades. This not only completely shattered the cyclical pattern of "retreat after rapid rise" in the energy storage market, but also directly triggered a structural shortage and a strong price recovery for 314Ah battery cells. Furthermore, driven by the looming cancellation of tax rebates at year-end, an even more intense wave of "export rush" is gaining momentum, potentially pushing the full-year battle between volume and price to its peak.

H1 2026 silver saw a sharp spike to 30,900 yuan/kg in January, then plunged 55% to 13,816 yuan/kg by June, driven by squeezed spot liquidity and Fed policy reversal from easing to hawkish. Supply grew steadily; PV silver demand fell 21% YoY. H2 outlook: wait for inflation signals and Fed pivot, silver likely remains under pressure.

The overseas spot primary aluminum market faced overall downward pressure this week, with premiums falling across all regions. Driven by multiple factors including the traditional overseas consumption off-season, fading concerns over tight global aluminum supply, weak end-user spot demand, and pressure from trade arbitrage, spot aluminum quotations in major overseas regions kept sliding amid muted trading activity. In terms of pricing performance, premiums in core overseas markets generally declined week-on-week compared with last Friday, July 3. The US Midwest DDP primary aluminum premium edged down from 110.25 US cents per pound to 109.75 US cents per pound, remaining under bearish pressure. Asian markets trended lower in tandem: CIF Thailand P1020A dropped from USD 345/MT to USD 335/MT; FCA Korea P1020A fell from USD 366/MT to USD 335/MT; CIF Korea P1020A retreated from USD 350/MT to USD 319/MT; Japan MJP ingot spot premiums plunged sharply from USD 380/MT to USD 355/MT. Spot premiums across Asian overseas aluminum markets cooled off markedly. Regional Breakdown The Japanese spot market stayed broadly weak, with end manufacturers only restocking for immediate operational needs without bulk pre-purchases. As market expectations of tight global aluminum supply continued to ease, buyers became increasingly reluctant to accept higher offers. Meanwhile, arbitrage trades emerged during the week: traders accumulated spot cargoes at low prices and captured spreads against long-term contracts, further weighing down spot transaction prices and dragging Japan’s spot rates lower. The US market also faced headwinds amid its traditional consumption off-season and feeble downstream end-user demand. With overseas primary aluminum restarts and new capacity set to ramp up in the second half of the year, expectations of looser supply gained traction. Downstream buyers remained cautious with purchasing, accepting lower prices and pushing regional premiums downwards. South Korea and Thailand saw synchronized softening in market conditions with subdued buying sentiment and consistent cuts to market offers. Traders are eager to liquidate inventories, yet downstream purchasers slow down procurement with minimal buying interest. Lopsided bargaining power pushed offer prices steadily lower, exerting continuous downward pressure on regional premiums. Outlook Overall, overseas aluminum markets are stuck in the seasonal consumption off-season, alongside growing expectations of ample global aluminum supply. Lacking solid support from physical demand and robust buying interest, overseas spot primary aluminum premiums are likely to maintain weak volatile momentum in the short run, with further downside risks lingering.

In H1 2026, silver experienced an extreme market trend marked by a sharp-peaked inverted-V and stepwise decline, driven by the interplay of two main themes: a spot silver squeeze anomaly and a shift in US Fed monetary policy. After hitting an all-time high of 30,900 yuan/kg in January, silver prices pulled back trend-wise to 13,816 yuan/kg in June, as interest rate cut expectations reversed and hawkish signals strengthened, representing a 55% pullback from the peak. On the supply side, silver ingot production rose 6.9% YoY, and imports surged before returning to normal. On the demand side, PV silver demand fell 21% YoY, with industrial demand taking over from investment as the main driver. In H2, attention will focus on the inflation turning point and marginal changes in the US Fed's policy; silver prices are expected to consolidate on a subdued note.

In early July 2026, CAAM and the CPCA sub-council successively released relevant data on the automotive market for June 2026 and H1. CAAM stated that in H1, China's auto industry operated generally steady, with cumulative declines in production and sales narrowing month by month. Market trends showed three key divergences: first, domestic demand was under obvious pressure, with sales dropping by double digits; second, exports exceeded expectations and provided stable support... SMM has compiled the relevant automotive market data for June 2026 and H1 for readers' reference. Automotive CAAM: June Auto Production and Sales Rose MoM; H1 Decline Narrowed Further vs. First 5 Months In June, auto production and sales reached 2.76 million and 2.81 million units, up 5.5% and 6.9% MoM respectively, down 1.2% and 3.2% YoY respectively. From January to June, auto production and sales totaled 14.993 million and 15.017 million units, down 4% and 4.1% YoY respectively, with the declines narrowing further compared to the first five months. CAAM: NEV Production and Sales Posted Steady Growth in June; H1 NEV Sales Accounted for 49.6% of Total New Vehicle Sales In June, NEV production and sales reached 1.598 million and 1.643 million units, up 26% and 23.6% YoY, respectively. NEV new vehicle sales accounted for 58.5% of total new vehicle sales. From January to June, NEV production and sales reached 7.438 million and 7.446 million units, up 6.7% and 7.3% YoY, respectively , with NEV new vehicle sales accounting for 49.6% of total new vehicle sales. CAAM: June Auto Exports Surpassed 1 Million Units for First Time in History; NEV Exports Up 1.6 Times YoY In June, auto exports reached 1.037 million units, up 11.6% MoM, up 75.1% YoY, with monthly exports surpassing 1 million units for the first time . In H1, auto exports reached 5.096 million units, up 65.3% YoY. In June, NEV exports were 523,000 units, up 17.2% MoM, up 1.6 times YoY ; traditional fuel vehicle exports were 514,000 units, up 6.4% MoM and up 32.7% YoY. In H1, NEV exports totaled 2.355 million units, up 1.2 times YoY; traditional fuel vehicle exports reached 2.741 million units, up 35.5% YoY. Regarding the H1 auto market, according to CAAM's analysis, in H1, China's auto industry operated generally steady, with the cumulative declines in production and sales narrowing month by month. Market flows exhibited three major divergences: First, domestic demand was clearly under pressure, with sales falling by double digits; export growth exceeded expectations, providing stable support. Second, the passenger vehicle market performed poorly, edging down slightly; the commercial vehicle market continued its positive trend, with sales maintaining growth. Third, the transition between old and new growth momentums continued, with the traditional ICE vehicle market shrinking further and NEVs growing steadily. Meanwhile, the CPCA also released data on the passenger vehicle market in June. In June, retail sales of passenger vehicles in China totaled 1.602 million units, down 23.2% YoY and up 6.1% MoM. Cumulative retail sales for the year to date reached 8.701 million units, down 20.2% YoY. China's passenger vehicle market in June 2026 exhibited a trend of recovery characterized by "overall volume under pressure, sequential strengthening, and extreme structural divergence." For passenger NEVs, June retail sales reached 1.007 million units, down 9.4% YoY and up 6.0% MoM; from January to June, retail sales of passenger NEVs totaled 4.704 million units, down 14.0% YoY. In June, retail sales of conventional ICE passenger vehicles were 600,000 units, down 39% YoY and up 6.3% MoM. Notably, sales of conventional hybrid models fell only 7% YoY and rose 24% MoM, an eye-catching performance. As for NEV exports, June passenger NEV exports reached 499,000 units, up 152.7% YoY, up 17.6% MoM , accounting for 56.9% of passenger vehicle exports, up 15.9 percentage points from the same period last year. Of these, pure electric vehicles accounted for 58.7% of NEV exports (63.1% in the same period last year), with the core focus A00- and A0-class pure electric vehicles representing 53.8% of pure electric exports (51.2% in the same period last year). As the scale advantages of Chinese NEVs become evident and market expansion demand grows, an increasing number of Chinese-branded NEV products are going global, with recognition outside China continuing to rise. Specifically, narrowly defined plug-in hybrids accounted for 37.7% of NEV exports (33.4% last year), while extended-range EVs accounted for 3.6% (3.5% last year). Despite recent interference from some external countries, exports of domestic narrowly defined plug-in hybrids to developing countries have surged rapidly, with a bright outlook. The CPCA stated that the core characteristics of the auto market in June were "a collapse in domestic ICE sales, strong dominance of NEVs, and surging exports." The core pressure on the domestic market downturn came from ICE vehicles, whose retail sales fell 39% under the impact of high oil prices. Their market share was 37.2% in June, and the year-on-year decline in ICE volume accounted for 78% of the total reduction in passenger car sales. Among them, retail sales of conventional hybrid models fell 7%, while pure ICE vehicles dropped 42%, further segmenting the ICE vehicle structure. High fuel prices, the consumer shift toward new energy vehicles, and other factors have accelerated the replacement of internal combustion engine vehicles by EVs. The new energy retail penetration rate stayed at a historical high of 62.8% this month. The electrification transition of joint venture brands has sped up, with joint venture new energy car model sales up 45% YoY in June, while internal combustion engine vehicle sales fell 39% YoY. Exports continued to be the industry’s core growth driver. New energy vehicles accounted for a record 57% of exports in June, while the 33% growth rate for internal combustion engine vehicle exports was also very strong, creating a super-strong performance where both new energy and internal combustion engine vehicles are going global at the same time. The current domestic auto market is increasingly defined by a fight for existing market share, with divergence within the industry continuing to intensify. The new energy market bid farewell to all-around growth and has entered a polarized landscape where high-end EVs experience explosive growth while low-end, economy-oriented car models are under pressure, with the county and township markets and entry-level car model segments seeing overly sharp declines. At the same time, the "new car model effect" is becoming short-lived, significantly weakening its ability to boost the market. Pressure on the channel side remains prominent, the pace of passive industry destocking has accelerated, and dealers are generally suffering losses with climbing operational risks. Overall, the MoM market improvement in June was only structural recovery; electrification upgrades and overseas exports have become the core long-term support for industry growth. The characteristics of the passenger vehicle market in June 2026: 1. Overall market under pressure with major structural divergence. The biggest focus is "cold internal combustion engine vehicles, hot battery EVs." The core reason for the domestic retail decline is the "internal combustion engine vehicle collapse," which pushed the new energy retail penetration rate rapidly past 60% to 62.8%, with the pace of electrification replacement exceeding expectations. 2. Mini EVs are under pressure, the A-segment car market is shrinking, and entry-level consumption urgently needs support; the launch of economy EV standards is eagerly awaited. 3. Exports showed explosive growth, with new energy vehicles accounting for 57% of exports (a record high). A new energy and domestic brand-led dual-drive globalization has become the core growth engine. 4. The characteristics of passive destocking are obvious, dealer inventories fell rapidly, listed dealers reported comprehensive losses, and dealers' survival pressure continues to intensify. 5. The high-end breakthrough of domestic brands was prominent, with retail sales for these brands accounting for over 50% in consumer market segments such as 200,000-300,000 yuan, 300,000-400,000 yuan, and above 400,000 yuan. June delivery data for new forces in the auto industry is out, Leap Motor is gaining unstoppable momentum, and how are automakers progressing toward their annual targets? At the beginning of July, several Chinese new force automakers released their June delivery data, with many enterprises reporting dazzling results: In June, Leap Motor continued its unstoppable momentum, delivering 93,376 units globally, up 95% YoY, with cumulative H1 deliveries reaching 356,487 units. According to previous media reports, Leap Motor's full-year 2026 sales target is 1 million units, and its target completion rate now stands at about 35.65%. This year, Leap Motor's new vehicle deliveries have climbed steadily, securing a leading position among new car-making forces with this stellar performance. In July, Leap Motor continued to gain momentum with the launch of its "Summer Deals, Save in the Season" car purchase event. Customers who place orders during the event can receive limited-time benefits worth up to 61,279 yuan, plus four lifetime free warranties and premium services. This generous package aims to provide users with a more hassle-free car ownership experience. As of June 18, 2026, Leap Motor's global cumulative deliveries surpassed 1.5 million units, marking a significant milestone in the brand's development. In June, NIO delivered 40,597 new vehicles, a new monthly high since 2026, up 62.9% YoY. Among them, the NIO brand delivered 21,908 units, up 50.1% YoY; the Ledo brand delivered 11,743 units, up 83.5% YoY; and the Firefly brand delivered 6,946 units, up 76.7% YoY. To date, NIO has cumulatively delivered 1,188,715 new vehicles. In H1 2026, NIO delivered a total of 191,123 new vehicles, hitting a record high, up 67.4% YoY, with deliveries of all three brands reaching record highs in the first half. According to publicly available information, NIO previously stated that it aims to maintain annual sales growth of 40% to 50%. Based on this, its 2026 sales target is 456,000 to 489,000 units. As of now, its full-year sales completion rate is around 39.08% to 41.9%. Meanwhile, as of now, NIO has achieved profitability for two consecutive quarters, entering the third phase of high-quality development. Its multi-brand strategy is steadily progressing, and synergies are driving rapid sales growth. In June, XPeng Motors delivered 40,126 new vehicles, up 15.9% YoY, with Q2 cumulative deliveries reaching 103,295 units. During the same period, the 10,000th XPeng GX rolled off the production line, and global cumulative deliveries of the XPeng X9 exceeded 60,000 units. The first SUV in the MONA series, the XPeng MONA L03, will make its China debut and start pre-sales on July 2. XPeng's product lineup is further enriched, and its global expansion continues to advance. In H1 2026, XPeng Motors delivered 165,977 vehicles, representing a completion rate of around 27.66% to 30.18% against its 2026 sales target of 550,000 to 600,000 units. It is worth mentioning that global cumulative deliveries of the XPeng X9 have now exceeded 60,000 units, setting a new record for the fastest delivery speed of an MPV by a new energy startup. In June, Li Auto delivered 30,895 new vehicles. In H1 2026, Li Auto delivered a total of 193,472 new vehicles. As of June 30, 2026, Li Auto's historical cumulative deliveries reached 1,733,687 units. In March this year, Li Auto's chairman Li Xiang proposed a YoY sales growth of over 20% in 2026, corresponding to a full-year target of 487,600 units. Currently, its H1 delivery completion rate is around 39.68%. In July, the new generation Li Auto L6 will also be officially launched. Xiaomi’s June deliveries continued to exceed 30,000 units, with its H1 sales at around 180,000 units, achieving approximately 32.73% of its sales target of 550,000 units announced in January 2026. Meanwhile, BYD, a globally renowned EV enterprise, sold a total of 403,472 NEVs in June, up 5.46% YoY. Its cumulative production for the year reached 1.8141 million units, down 15.11% YoY, and cumulative sales reached 1.8085 million units, down 15.72% YoY. Among these, passenger vehicle production was 396,400 units and sales were 397,300 units. Notably, in June, BYD’s markets outside China continued to see rapid growth, with overseas sales of passenger vehicles and pickups reaching 174,897 units, up 95% YoY. In H1, BYD’s cumulative sales reached 1,808,511 units, and cumulative NEV sales exceeded 16.9 million units. According to public information, its previously set sales target was between 5 million and 5.5 million units, and its current achievement rate is around 32.88%–36.17%. Looking at the June report cards of BYD and these new force automakers, BYD and Leap Motor stood out: BYD’s sales once again surpassed 400,000 units, while Leap Motor continued to set new delivery records, with over 90,000 global deliveries keeping it firmly in the top spot among new force automakers. Both NIO and XPeng Motors exceeded 40,000 deliveries in June, delivering commendable performances. However, the sales achievements of these automakers still fall short of their annual sales targets. The highest achievement rate is Li Auto’s 39.68%. That said, expectations remain for the September-October peak season in H2, and with the recent rollout of multiple favorable policies for the auto industry, automakers’ subsequent performance is still expected to be promising. Policy side, on July 2, the Ministry of Finance, the State Taxation Administration, and the Ministry of Industry and Information Technology issued an announcement on adjusting the preferential vehicle and vessel tax policies for energy-saving vehicles and NEVs, stating that from January 1, 2027, the policy of halving the vehicle and vessel tax for energy-saving vehicles will be abolished, and the exemption of vehicle and vessel tax for pure electric commercial vehicles, plug-in hybrid (including range-extended) vehicles, and fuel cell commercial vehicles will also be abolished; taxpayers who newly acquire or have already acquired such vehicles before this announcement takes effect shall be subject to vehicle and vessel tax in accordance with the Vehicle and Vessel Tax Law of the People’s Republic of China, its implementation regulations, and other relevant provisions. In addition, on June 29, the China Automotive Power Battery Industry Innovation Alliance and the Zhongguancun Energy Storage Industry Technology Alliance jointly released the "Initiative on Regulating Supplier Payment for Power and ESS Battery Enterprises," which set out norms and initiatives for multiple stages including order confirmation and changes, delivery and acceptance, payment and settlement, and contract duration. After the release of this initiative, enterprises in China's power battery and ESS battery industry chain, including CATL, EVE, and Gotion High-tech, actively responded. The relevant official of the Equipment Industry Section I under the Ministry of Industry and Information Technology commented that the 11 key battery enterprises actively responded to the initiative and proposed relevant implementation measures, demonstrating the responsibility and commitment of enterprises. The Ministry of Industry and Information Technology will fully leverage the role of departmental coordination mechanisms, promptly resolve issues in implementation, and take multiple measures to promote the establishment of a collaborative and win-win development ecosystem for the entire industry chain of power batteries and ESS batteries, fostering healthy and sustainable industrial development. Looking ahead to H2, CAAM expects that the program of large-scale equipment upgrades and consumer goods trade-ins will continue to be implemented in an orderly manner, and consumption in the automotive aftermarket is expected to see new growth opportunities, with new product supply from enterprises continuously enriched, market prices relatively stable, and the overall economic operation of the industry further improving. At the same time, it must be noted that the external environment is complex and volatile, uncertainties continue to increase, the issue of insufficient domestic demand remains prominent, and industry operations still face significant pressure. It is necessary to stabilize policy expectations, strengthen guidance and regulation, closely monitor changes in the international situation, effectively address risks and challenges, and steadily expand international markets.

In the second half of last year, ahead of the halving of the NEV purchase tax rebate, ternary cathode orders climbed steadily, hitting record highs month after month. At that time, the market generally expected ternary demand growth for 2026 to be within 10%. But the actual results for the first half of this year came in much stronger. According to SMM, domestic ternary cathode production reached 493,000 metric tons in H1 2026, up 40% YoY, while global ternary cathode output reached 611,500 metric tons, up 24% . Meanwhile, CAAM data shows that NEV sales in China (including exports) reached 7.445 million units in H1 2026, up only 7% YoY, with domestic sales actually contracting by 13%. Given such modest growth in vehicle sales, where did the strong performance of ternary cathode come from? The answer lies in two key factors: a rising share of premium vehicle models and a rapid increase in battery capacity per vehicle . The halving of the purchase tax rebate has had a greater impact on low-priced vehicles. For A00-class models priced under RMB 50,000, the exemption was a major selling point—now, buyers face an additional tax payment of several thousand yuan, significantly eroding their cost advantage. In contrast, for mid-to-high-end models priced between RMB 200,000 and 300,000, the RMB 15,000 rebate cap still covers most of the tax, so the actual cost increase perceived by consumers is limited . At the same time, trade-in subsidy rules shifted from a fixed-amount structure to a tiered system based on the new vehicle price—higher-priced purchases yield subsidies closer to the cap, effectively steering consumer demand toward the premium segment . As a result, the share of B-segment, C-segment, and SUVs in China's NEV passenger car mix rose from 68.3% in 2025 to 73.6% in H1 2026—and these are precisely the models that predominantly use ternary battery cells. The rising share of premium models also directly lifted average battery capacity per vehicle . In May, the average battery capacity of BEV passenger cars reached 62 kWh, up 11% year-on-year, while PHEV passenger cars reached 37 kWh, up 37%. While automakers have been proactively increasing battery sizes to meet market demand, the more significant driver has been the compositional shift toward premium vehicles. This explains the apparent paradox: vehicle sales growth has been moderate, yet cathode material demand has surged—the key lies in the increase in battery capacity per unit . Overseas markets also contributed to the growth. European NEV sales rose approximately 30% year-on-year in the first half of the year, supported by local subsidy policies, high oil prices that favor NEVs, and the aggressive expansion of Chinese brands. Given that ternary batteries still account for more than 60% of Europe's NEV passenger car market , leading battery manufacturers serving the European market—such as CATL, EVE, AESC, and LGES—have maintained high procurement volumes of ternary cathode materials from China this year. Another notable feature of this year's production schedule has been its atypical seasonal pattern, largely influenced by raw material price volatility and policy shifts. On the raw material front, pricing between domestic ternary battery manufacturers and cathode producers is generally settled using a M-1 month metal price mechanism. This gives battery makers a strong incentive to build inventories ahead of anticipated price increases . For instance, in January, the SMM average monthly price of lithium hydroxide (coarse grains) surged to RMB 147,100 per ton, but the settlement price referenced the December price of RMB 88,800 per ton. This translated into a cost saving of more than RMB 26,000 per ton of cathode material, which is why production remained robust even during a traditionally slow month. A similar pattern played out in May, when the monthly average lithium hydroxide price rose by about RMB 20,000 per ton from the previous month, prompting another wave of restocking and driving cathode orders beyond expectations. On the policy side, the most significant impact came from the removal of the VAT rebate on ternary cathode exports, which pulled a large volume of export orders forward into Q1, breaking the typical seasonal slowdown. Domestic production in Q1 reached 236,000 metric tons, up 47% YoY. Notably, after the rebate was officially withdrawn, overseas orders did not drop sharply—Q2 still posted 34% YoY growth. This resilience can be attributed to two factors: first, overseas battery makers remain heavily reliant on Chinese cathode suppliers , who offer clear advantages in product quality, stable mass-production capabilities, and cost, making it difficult to switch suppliers in the short term. Second, overseas end-market demand remains solid , with popular models in Europe (Volkswagen ID series, BMW Neue Klasse, Renault, Hyundai IONIQ series, Tesla, etc.) and key models in Japan and Korea (Toyota, Hyundai, Kia, Tesla, etc.) continuing to rely on ternary chemistries. With order books full and procurement needs urgent, customers have little room to qualify new suppliers, which has only reinforced existing partnerships. Looking ahead to the second half of the year, the upcoming removal of the VAT rebate on lithium battery exports next year is expected to bring some orders forward into 2026. However, the market has already priced this in, and battery manufacturers have ample time to plan their inventory strategies, so a concentrated surge similar to the one seen ahead of the ternary rebate cancellation is unlikely. The purchase tax rebate will remain at the halved level next year and will not be fully phased out until the year after, so there is no additional pull-forward effect for Q4 2026. With orders already exceeding expectations in the first half and battery makers continuing to build inventories, the traditional "Golden September-Silver October" peak may be less pronounced this year. Still, seasonal patterns persist, and the market's inherent restocking momentum remains, so Q4 still warrants attention. SMM currently forecasts: 1.02 million metric tons of domestic ternary cathode production for 2026, up 24% year-on-year; 240,000 metric tons overseas, down 2%; and a global total of 1.26 million metric tons, up 18% .