On August 13, the SMM Imported Copper Concentrate Index (weekly) came in at -$175.37/dmt, down $1.46/dmt from -$173.91/dmt in the previous period. The payable indicator for 20% grade domestic trade ore was reported at 98.5%-99.5%. Spot market activity this week declined WoW, with some mines launching tenders. Spot transaction side, a trader sold 10,000 mt of Carmen at an index deduction of $25/dmt, for September shipment, QP: M+1/M+5, with the additional term that Ag below 20g is payable at 65%; a trader sold 10,000 mt of South American clean ore at an index deduction of $23/dmt, for October shipment, QP: M+1/M+5; a trader sold 10,000-20,000 mt of Erdenet at an index deduction of $20/dmt; two other traders offered clean ore at index deductions of $24-25/dmt, for shipment from September to October; in addition, market talk indicated that a trader sold copper concentrates to a smelter at a fixed level of -$180/dmt. Mine tender side, for the previously tendered September high-arsenic ore, the transaction price on the trader side was -$260/dmt, QP: M+1/M+4, with 0.6-1g gold not payable; tenders are underway for 10,000 mt of Mantoverde for September shipment and 10,000 mt of Timok for shipment from September to October, and for 10,000 mt each of September and October BVC; tender results remain unknown. At present, against the backdrop of continued declines in the imported copper concentrate index and further widening of spot transaction deductions, some smelters have become less willing to accept pricing at index deductions of $20/dmt or above and have begun to negotiate based on fixed TCs; suppliers, however, still prefer to quote on an index deduction basis. Divergence between buyers and sellers over pricing benchmarks and reasonable deduction levels has widened, and progress on spot transactions has turned more cautious overall. Cochilco recently lowered its 2026 Chilean copper production forecast to 5.27 million mt Cu, down 2.6% YoY, mainly due to lower grades at large mines in H1, maintenance, slower project ramp-ups, and operating constraints. From January to June 2026, China imported 4.2808 million mt of copper concentrates from Chile, down 8.26% YoY, with the import share falling to 29.3%; the supply contribution of Chilean material to the Chinese market weakened on a phased basis. However, most miners are maintaining their full-year production guidance, mainly counting on a recovery in H2 driven by the switch to higher-grade ore sections, completion of maintenance, and project ramp-ups. Expectations for the restart of First Quantum's Cobre Panamá copper mine have increased. Panama’s Minister of Commerce and Industry, Julio Moltó, recently visited Donoso, Omar Torrijos Herrera, and La Pintada, where he met with mine workers, local governments, and suppliers; the relevant recommendations will be submitted to an inter-agency committee for evaluation. The mine is currently authorized to process stockpiled ore and has supported around 3,200 direct jobs and more than 3,000 indirect jobs. As of end-June, First Quantum had processed 2.1 million mt of stockpiled ore and produced about 3,200 mt of contained copper, with the first shipment expected to take place this month. A molten material leak incident occurred at the converter (C-Furnace) of PT Smelting's copper smelter in Gresik, East Java. Currently, there is no clear expectation for when the damaged equipment can return to service, and repairs are expected to take at least several weeks. Due to low in-plant copper anode inventory, the smelting outage has directly affected metal production on the refining side. Copper cathode shipments are expected to be disrupted in the coming weeks, and the plant is negotiating delayed deliveries with clients. In terms of capacity, PT Smelting Gresik has smelting capacity to process approximately 1.3 million dmt of copper concentrates per year, and its refining side has copper cathode capacity of 342,000 mt/year. According to Freeport-McMoRan's annual report, in 2025 the plant produced 230,300 mt of copper anode and 207,200 mt of copper cathode; due to raw material supply disruptions and maintenance, these were significantly lower than the 398,200 mt of copper anode and 335,200 mt of copper cathode in 2024. On August 14, 2026, SMM recorded copper concentrate inventories at 11 ports totaling 770,000 mt in physical content, up 78,000 mt in physical content from August 7. The main increases came from Qingdao Port, Fangchenggang Port, and Yantai Port, with respective WoW increases of 30,000 mt, 20,000 mt, and 23,000 mt; the main decrease came from Nanjing Port, down 10,000 mt WoW.

SMM August 13: Domestic Bauxite: Domestic Ore Supply Disruptions Linger, Mainstream Prices Remain Stable Affected by coking coal-related events in Shanxi, mining at domestic bauxite main producing areas such as Shanxi and Henan was somewhat disrupted in the short term, and ore supply showed phased changes. Meanwhile, alumina prices remained at relatively high levels, and alumina enterprises had moderate tolerance for rising raw material prices, mainly passively accepting current ore prices in the short term. As of today, in Shanxi, VAT-exclusive EXW transaction prices at crushing plants for bauxite with an Al/Si ratio of 5 and 60% alumina content were around 530-550 yuan/mt; in Henan, VAT-exclusive EXW transaction prices at crushing plants for bauxite with an Al/Si ratio of 5 and 60% alumina content were around 500-540 yuan/mt; in Guiyang, VAT-inclusive EXW prices for bauxite with an Al/Si ratio of 6 and 60% alumina content were 490-540 yuan/mt; in Guangxi, VAT-exclusive EXW transaction prices at crushing plants for bauxite with an Al/Si ratio of 6 and 53% alumina content were 320-335 yuan/mt. Imported Bauxite: August Contract Prices Raised Slightly, Imported Ore Price Divergence Between Upstream and Downstream Intensifies Data as of August 7 showed that total weekly port departures of bauxite at main ports in Guinea were 4.5611 million mt, up 690,800 mt from the previous week, with shipments higher. As US-Iran tensions heated up again, oil prices rebounded, and ocean freight rates from Guinea to China showed an upward trend, with market quotes rising to around $35/dmt; costs at various mines also increased to varying degrees. Coupled with policy uncertainty in Guinea and transport affected by severe weather, mines in Guinea tightened control over bauxite shipments. In Australia, as of August 7, total weekly port departures of bauxite at main Australian ports were 926,700 mt, down 126,000 mt from the previous week, with shipments basically flat. Going forward, attention should be paid to the shipment pace of Australian mines and changes in port departures. As of August 7, China's bauxite port arrivals were 5.2267 million mt, up 1.352 million mt from the previous week. Continuous attention should be paid to the impact of elevated and fluctuating oil prices and ocean freight rates on future port arrival pace and landed costs. Price-wise, Guinea's August bauxite long-term contract prices rose slightly compared with July, settling at $73-74/mt, but downstream price acceptance was relatively limited. Meanwhile, bauxite inventories at alumina refineries in China remained high. This week, alumina refinery bauxite inventories were relatively stable, with days of inventories at around 96 days, capping ore prices to some extent. For Guinean bauxite, with transportation costs from Guinea to China rebounding and shipment reductions caused by the traditional rainy season and severe weather adding to mine costs, offers from upstream sellers and traders remained firm and edged up slightly to a high price range around $73/mt; at Chinese alumina refineries, under the combined impact of persistently high inventory and shrinking margins, intended transaction prices held at $70-71/mt; upstream and downstream participants in the bauxite market diverged sharply on prices, transactions slowed, and the standoff carried over from last week. As of this Thursday, Guinean bauxite FOB quotes were $38-42/mt, with the average price unchanged from last Thursday; Guinean bauxite CIF prices were $70-74/mt, with the average price unchanged from last Thursday; the SMM imported bauxite index price stood at $71.72/mt, up $0.15/mt from last Thursday. Going forward, bauxite prices will still depend on cost conditions at individual mines, the traditional rainy season in Guinea, and the impact of the Guinean government's bauxite export quota policy on overall shipments. SMM will continue to closely monitor bauxite market trends and transaction activity. Overall , domestic ore prices held at current levels; meanwhile, inventory at Chinese alumina refineries remained high (about 96 days), and the bid-offer standoff between buyers and sellers continued; uncertainty over Guinea's quota policy, lower shipments, and the traditional rainy season also put some upward pressure on bauxite costs. In the short term, with shipments reduced by the dual impact of costs and policy, imported ore prices are expected to continue their high-level standoff pattern; afterward, close attention should be paid to the implementation of Guinea's quota policy and ocean freight rate trends.

[SMM Tungsten Daily Review: Mine-side transactions steadily improve; APT market still needs demand stimulus] SMM August 12 News: Today, the tungsten concentrates market saw stable transactions. SMM 65% wolframite concentrates held at 416,500 yuan per standard tonne (65%WO3 basis), and the price spread between spot orders and long-term contracts in the market narrowed noticeably.

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

SMM News on August 12: Metals market: As of the midday close, base metals in the domestic market rose almost across the board. SHFE copper rose 0.27%, and SHFE aluminum rose 0.93%. SHFE lead rose 0.25%. SHFE zinc rose 0.7%. SHFE tin rose 1.44%. SHFE nickel fell 0.16%. In addition, the most-traded cast aluminum futures contract rose 0.74%, and the most-traded alumina contract rose 0.93%. The most-traded lithium carbonate contract rose 2.97%. The most-traded silicon metal contract edged up. The most-traded polysilicon futures contract rose 3.69%. Ferrous metals all rose. Iron ore rose 0.28%, rebar rose 0.37%, and hot-rolled coil rose 0.34%. Stainless steel rose 0.24%. For coking coal and coke: the most-traded coking coal contract rose 2.17%, and the most-traded coke contract rose 1.75%. Overseas base metals: as of 11:46, LME metals rose across the board. LME copper rose 0.27%, and LME tin rose 1.14%. LME zinc rose 0.5%. Gains in LME aluminum, LME lead, and LME nickel were all within 0.3%. Precious metals: as of 11:46, COMEX gold rose 0.54%, and COMEX silver rose 1.12%. Domestic precious metals: SHFE gold rose 0.69%, and the most-traded SHFE silver contract rose 1.22%. In addition, as of the midday close, the most-traded platinum futures contract fell 0.18%, and the most-traded palladium futures contract fell 1.09%. As of the midday close, the most-traded European container shipping contract rose 1.44% to 1,585.5 points. As of 11:46 on August 12, midday moves in some futures: Spot and Fundamentals Aluminum: Today, futures continued to surge, while the spot market in South China faced pressure from the “three mountains.” First, high absolute prices combined with high premiums in reality prompted suppliers to rush to sell more to cash out... Macro front China: [PBOC reverse repo operations recorded a net withdrawal of 5 billion yuan on the day] The PBOC conducted no reverse repo operations today. As 5 billion yuan of 7-day reverse repos matured today, it recorded a net withdrawal of 5 billion yuan on the day. [Guangdong power load hit a new high for the fourth time this year] At 13:47 on August 11, power load on the Guangdong power grid hit a new high for the fourth time this year, reaching 175.7 million kW, up 6.53% YoY. At present, Guangdong’s power supply is stable and orderly. On the same day, loads in cities including Yangjiang, Shantou, Jieyang, and Chaozhou within Guangdong Province hit record highs. ​​​(Guangdong Fabu) [C919 domestically produced large aircraft officially began operating international commercial routes] Starting today (the 12th), Air China’s Beijing–Ulaanbaatar route to the capital of Mongolia will be operated by the domestically produced C919 large aircraft, marking the official launch of international scheduled commercial route operations for the domestically produced large aircraft. (CCTV News) US dollar: As of 11:46, the US dollar index rose 0.05% to 99.87. The market awaits the upcoming US July CPI data, hoping to find clues on the Fed's rate path. According to CME "Fed Watch": the probability that the Fed keeps rates unchanged in September is 52.0%, and the probability of a cumulative 25bp hike is 48.0%. The probability that the Fed keeps rates unchanged in October is 38.7%, a cumulative 25bp hike is 49.0%, and a cumulative 50bp hike is 12.2%. (Jinshi Data APP) The Wall Street Journal reporter Nick Timiraos said that the market will focus on the MoM change in the July inflation data to be released on Wednesday, as an increasing number of FOMC members indicate that inflation readings in the coming months will determine whether they believe the forecast of "inflation pulling back to 2% over the next two years" remains achievable without further rate hikes. Meanwhile, the Fed's new chair Warsh recently dismissed this framework of linking policy-sensitive forecast revisions to high-frequency data. He previously stated that he does not believe the Fed's current "data-dependent" policy has much practical value. Furthermore, Nick added that the working group established by Warsh seems in part to help construct a framework to replace the old one. However, until the new framework is clear, the old framework appears to remain in operation. Glenmede strategists said regarding the US July CPI that investors are anticipating another relatively mild inflation report, with headline CPI expected to rise 3.4% YoY, while core price pressures remain manageable. As US-Iran tensions escalate, oil prices rose further in July, and the energy sector could once again bring pressure. However, the market reaction this time has been more stable, thanks to proactive measures and strategic reserve releases that maintained oil supply stability. The Fed has ample time before its next meeting to assess two inflation reports, giving it more time to evaluate whether energy pressures remain contained or begin to broaden, a distinction that could well influence future policy direction. Other currencies: According to foreign media reports, yen traders are ramping up options market activity ahead of key US inflation data, and amid a lack of consensus on the yen's future direction, they are using derivatives to enhance trading flexibility. The one-week implied volatility for USD/JPY rose for a second straight session on Wednesday, after the gauge had declined for five consecutive sessions. The reason was that traders were positioning ahead of the release of the US inflation report. The data was expected to influence the US Fed's monetary policy outlook and the US dollar's trajectory. Additionally, volatility in longer-dated options also edged up. The rise in volatility reflected a divergence in market views. For short tenors, the market remained concerned about the possibility of joint US-Japan intervention in the foreign exchange market, so USD/JPY put options continued to trade at a premium over call options, showing that investors were seeking protection against a sudden drop in the exchange rate. However, over longer tenors, investors continued to buy call options to bet on a renewed rally in USD/JPY. (Jin10 Data APP) Data-wise: Figures to be released today include the US July unadjusted CPI YoY, US July seasonally adjusted CPI MoM, US July seasonally adjusted core CPI MoM, US July unadjusted core CPI YoY, and Germany's July CPI MoM final reading. In addition, Tencent will hold its Q2 earnings call, MSCI will announce its August index review, the EIA will release its monthly Short-Term Energy Outlook, the IEA will publish its monthly Oil Market Report, and OPEC will release its monthly Oil Market Report (the specific release times for the monthly reports are to be determined, typically published around 18-21 Beijing Time). Crude oil: As of 11:46, both benchmarks rose, with WTI up 1% and Brent up 0.92%. Uncertainty over the US-Iran deal outlook supported prices. Iran’s state television (IRIB), citing an advisor to the Supreme Leader, reported: The Strait of Hormuz will remain closed until relevant conditions are met. (Jin10 Data APP) Iran's Oil Minister Mohsen Paknejad stated on the 11th that Iran was repairing natural gas production facilities damaged by the war, with daily capacity planned to rebound to 95 million m³ by the end of September. Paknejad said that reconstruction work on four damaged gas processing facilities was progressing rapidly, contractors had commenced work, and completion was anticipated ahead of schedule, restoring pre-war capacity. Earlier reports indicated that Iran's daily natural gas production had decreased by about 230 million m³ since the US and Israel launched military operations against Iran. (Jin10 Data APP) The latest Short-Term Energy Outlook (STEO) from the US Energy Information Administration (EIA) indicated that, due to persistently severe restrictions on crude oil transport through the Strait of Hormuz, the degree of global oil supply disruption was greater than previously expected, prompting the EIA to raise its future oil price forecasts. The EIA projects that the 2026 Brent spot price will average $87/bbl, up from the prior forecast of $82/bbl ; and that the Q3 2026 Brent average will be about $85/bbl, with prices in the coming months largely sustaining levels seen in the first week of August. EIA says its latest forecast assumes that recent threats to vessels carrying Saudi crude through the Bab el-Mandeb Strait have not caused additional production halts, and severe shipping restrictions in the Strait of Hormuz will persist into August . EIA expects that most Middle Eastern crude oil production will return close to pre-conflict average levels by early 2027. However, some supply disruptions are expected to persist until the end of 2027, at a scale of around 600,000 barrels per day. The average price for 2027 is forecast at $69/barrel, up from $65/barrel previously. (Wallstreetcn) Additionally, Russia has started importing gasoline from the distant Indian market, after Ukrainian attacks on Russian refineries caused a severe domestic fuel supply shortage. According to shipping data provider Kpler, this marks the first time Russia has imported motor gasoline from a South Asian country. Kpler said the first gasoline cargo arrived on August 5, and more shipments may arrive in Russia in the future. These fuel volumes were shipped via a series of tankers linked to Russia, and were transshipped near Egyptian waters before heading to Russia. Kpler's chief analyst Sumit Ritolia said, "The emergence of Indian gasoline supply is particularly noteworthy." He said these cargoes from India, along with continued gasoline imports from Belarus and other neighboring markets, highlight the severity of the current domestic gasoline supply-demand imbalance in Russia, and also reflect how declining refinery operating rates are reshaping traditional Russian oil product trade flows. (Jin10 Data APP) Spot Market at a Glance: ► ► ► ► ► ► ► ► ► ►

LME aluminium hit its highest level since June, trading around $3,337 per tonne on August 11, up more than 8% since the end of June, as stalled US-Iran negotiations over reopening the Strait of Hormuz—a route that once carried around 10% of global aluminium production, raise fears of prolonged Middle East supply disruption; the concern is amplified by LME warehouse inventories sitting near 250,000 tonnes, their lowest since November 1990, with new supply from China and Indonesia unable to offset the decline, while Norsk Hydro has warned the global aluminium deficit could exceed 900,000 tonnes this year if Hormuz trade isn't normalized, leaving the market caught between fresh Asian supply and a shrinking inventory cushion against further Middle East shocks.

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

SMM News, August 12: Metals Market: Overnight, base metals on both domestic and overseas markets showed mixed performance. SHFE lead closed flat at 15,860 yuan/mt, LME aluminum rose 0.82%, SHFE aluminum gained 0.58%, and other metals saw slight fluctuations in their % changes. The most-traded alumina contract rose 0.93%, and cast aluminum ticked up 0.42%. In the ferrous metals sector overnight, all contracts gained except stainless steel. Stainless steel fell 0.07%, iron ore rose 0.76%, rebar and hot-rolled coil both edged up within 0.5%, while coking coal and coke gained 1.64% and 1.01%, respectively. In precious metals, COMEX gold rose 0.18% overnight, while COMEX silver fell 0.63%. On the domestic front, SHFE gold dropped 0.28% and SHFE silver slid 0.42%. Overnight closing prices as of 6:38 am, August 12: Macro Front China: [Zhengzhou Adjusts Housing Provident Fund Contribution Base] On August 11, the Zhengzhou Housing Provident Fund Management Center issued a notice on adjusting the 2026 housing provident fund contribution base. The notice specified that Zhengzhou's 2026 contribution base would be adjusted starting July 1, 2026. Both employee and employer contribution ratios must be no lower than 5% of an employee's average monthly salary from the previous year, and no higher than 12%. Employers may independently determine the ratio within the 5%-12% range based on their actual circumstances. (From Wall Street CN APP) [Weihai, Shandong Optimizes and Adjusts Housing Provident Fund Usage Policies] The Weihai Housing Provident Fund Management Center in Shandong Province has optimized and adjusted its policies. The maximum loan amount for a single depositor was raised from 600,000 to 800,000 yuan, and for dual depositors from 1 million to 1.2 million yuan. After stacking multiple preferential policies, the ceiling reaches up to 1.6 million yuan for a single depositor and 2 million yuan for dual depositors. (From Wall Street CN APP) [Shanghai Aims to Expand Software and IT Services Industry to 4 Trillion Yuan by 2030] Shanghai issued the "15th Five-Year Plan for the Development of Shanghai's Software and Information Services Industry." By 2030, the city aims to build the industry into a "power source" for economic growth, a "main arena" for AI-enabled applications, and a "bridgehead" for global competition, with the following key targets: total industry scale is expected to reach 4 trillion yuan, and industry added value to exceed 1.1 trillion yuan. Industry quality and efficiency will further improve, with a batch of breakthrough achievements in key areas such as artificial intelligence and critical software. The number of enterprises with revenue exceeding 10 billion yuan is projected to rise to 35, fostering a group of high-quality enterprises with industrial ecosystem dominance and emerging firms with potential leading influence. The industry structure will be further optimized, with the proportion of high-end software, digital content, and digital-intelligent services increasing, and the formation of several internationally competitive industrial bases and regional clusters. (From Wall Street CN APP) US Dollar: As of the overnight close, the US dollar index rose 0.01% to 99.82. Business Insider analyst William Edward noted two possible scenarios following the Wednesday CPI release: ① If inflation runs hot, stocks may fall. This could be the worst-case market scenario: stagflation. Investors had hoped the weak July jobs data would provide the US Fed with the rationale to cut interest rates. Hence, stocks surged sharply on Friday—bad news on the jobs front was actually good news for markets. However, given Warsh's outspokenness on curbing inflation, a hot CPI report could prompt him to raise interest rates even amid a soft employment outlook. In any case, it is hard to imagine stocks continuing to rally if inflation comes in higher than expected. Unlike employment data, bad news on CPI is truly bad news. ② If inflation eases, stocks could soar. While inflation is unlikely to drop below the Fed's 2% target, investors would likely welcome any reading below 3%, seeing it as a sign that CPI growth is slowing down, allowing the Fed to cut interest rates comfortably—or at least hold steady. Even the latter case alone could unwind the rate-hike expectations priced in for later this year, letting investors breathe a little easier. (Jin10 Data APP) Wall Street Journal reporter Nick Timiraos noted that the market will focus heavily on the MoM change in the July inflation data due Wednesday, as a growing number of FOMC members say the inflation readings over the coming months will determine whether their forecast of "inflation falling back to 2% over the next two years" remains achievable without further rate hikes. However, new Fed Chair Warsh has recently dismissed this framework that ties policy-sensitive forecast revisions closely to high-frequency data. He previously stated he sees little practical value in the Fed's current "data-dependent" approach. Nick also mentioned that part of the working group established by Warsh seems aimed at helping build a framework to replace the old one. But until a new framework is clearly defined, the old one still appears to be operating. (Jin10 Data APP) According to CME "Fed Watch": the probability of the US Fed holding rates unchanged in September stands at 52.0%, while the probability of a cumulative 25bp rate hike is 48.0%. For October, the probability of holding rates unchanged is 38.7%, a cumulative 25bp hike 49.0%, and a cumulative 50bp hike 12.2%. (Jin10 Data APP) Bank of America analysts believe that if the US CPI report surprises to the downside, the US dollar could see a relatively stronger reaction, as it would "essentially rule out" a Fed rate hike in September and challenge current market pricing. Analysts including Alex Cohen, Stephen Juneau, and Meghan Swiber wrote in a Tuesday note: "Following the clearly soft June CPI data, we expect the July CPI to be more in line with recent trends, with headline CPI up 0.1% MoM and core CPI up 0.2% MoM." (From Wall Street CN APP) Macro: Today, data including the US July unadjusted CPI YoY, US July seasonally adjusted CPI MoM, US July seasonally adjusted core CPI MoM, US July unadjusted core CPI YoY, and Germany July final CPI MoM will be released. In addition, Tencent will hold its Q2 earnings conference call, MSCI will announce its August index adjustment notice, EIA will publish its monthly Short-Term Energy Outlook, IEA will release its monthly crude oil market report, and OPEC will release its monthly crude oil market report (exact release time TBD, generally around 18-21 Beijing time). Crude Oil: Overnight, oil prices on both sides of the Atlantic rose, with WTI up 1.34% and Brent up 1.8%. Doubts over the prospect of a potential peace deal between the US and Iran fueled concerns that Middle East supply disruptions will persist. The US now expects that the about 600,000 bbl/day of oil supply disruptions caused by the US-Iran war will last until the end of next year, as the conflict continues to impede oil shipments through the critical Strait of Hormuz. According to the EIA's Short-Term Energy Outlook, an average of about 4.9 million bbl/day of oil were transported through the Strait of Hormuz in Q2 this year. That compares with a daily average of 21.6 million barrels in Q4 2025, before the US and Israel attacked Iran. As the conflict enters its sixth month, global consumers again face the risk of higher fuel prices and elevated inflation. The EIA raised its 2026 gasoline and diesel price forecasts by 3.7% and 5.4%, respectively, and lifted its 2027 retail gasoline price estimate by 6.5% from a month ago. The agency also estimated that the scale of Middle East production outages fell to around 5.5 million bbl/day in July, down from 7.5 million bbl/day in June. Outages are expected to widen again in Q3 to an average of 6.6 million bbl/day. The report assumes that recent threats against vessels carrying Saudi crude through the Bab el-Mandeb strait have not caused additional supply disruptions. If this assumption holds, the agency expects that most production and trade activities may not return to pre-war levels until early 2027. (Wall Street CN) The EIA released its Short-Term Energy Outlook (STEO): it forecasts Brent crude prices at $87/bbl in 2026 (previously $82/bbl) and $69/bbl in 2027 (previously $65/bbl). US oil production is projected at 13.8 million bbl/day in 2026 (previously 13.8 million bbl/day) and 14.2 million bbl/day in 2027 (previously 14 million bbl/day). The roughly 600,000 bbl/day of crude oil supply disruptions in the Middle East are expected to persist through the end of 2027. US LNG exports are forecast at 17.4 billion cubic feet per day in 2026 (previously 17.4 billion cubic feet per day) and 18.6 billion cubic feet per day in 2027 (previously 18.6 billion cubic feet per day). The next STEO will be released on September 9. (Wall Street CN) API data showed that last week, US API crude inventories rose by 9.072 million barrels, following a 2.69 million-barrel increase the prior week. API Cushing crude inventories rose by 157.1 barrels, after a 2.358 million-barrel increase previously. API gasoline inventories fell by 1.531 million barrels (compared with a 156,000-barrel build the prior week), while distillate inventories decreased by 596,000 barrels (versus a draw of 118,000 barrels the week before).

[SMM Aluminum Express News] Norsk Hydro has reduced alumina production at its Alunorte refinery in Brazil to 50% following disruptions to natural gas supply from CELBA, part of New Fortress Group. To mitigate the disruption, Alunorte is purchasing spot gas, seeking direct access to the Barcarena LNG receiving and regasification terminal, and pursuing alternative long-term gas supplies. Hydro said production will begin ramping back to full capacity once gas availability normalizes. Hydro estimates the disruption could negatively impact its Bauxite & Alumina business by US$75–100 million in Q3 2026, reflecting both lower alumina production and gas purchases above the contracted price. The company said the ultimate financial impact remains uncertain.

[PT Smelting Gresik Incident!] The converter at PT Smelting Gresik experienced a molten material leak accident, and repairs are expected to take at least several weeks. Affected by low anode inventory, the smelting suspension has impacted copper cathode production. Copper cathode shipments will be suspended in the coming weeks, and the plant is negotiating with clients for delayed deliveries. The plant has a copper cathode capacity of 342,000 mt/year and a smelting capacity for copper concentrates of about 1.3 million dmt/year.