On July 16, the Ministry of Finance, the General Administration of Customs, and the State Taxation Administration jointly issued Announcement No. 20 of 2026, introducing systemic adjustments to the consumption tax policy on certain batteries. This marks the most significant policy revision since the establishment of the battery consumption tax framework in 2015, covering key categories such as lithium-ion batteries, solar cells, sodium-ion batteries, and solid-state batteries. Through a combined mechanism of “tiered tax rates + targeted exemptions + standards-based access,” it addresses the dual objectives of tax regulation and industrial guidance. 1. Lithium-Ion Batteries to Be Taxed First: 2% from September, Rising to 4% in September Next Year According to the announcement, starting September 1, 2026, conventional battery categories such as lithium-ion batteries will be subject to a 2% consumption tax rate, which will be raised to 4% from September 1, 2027. Lithium-ion batteries are the category most broadly affected by the new rules, with power batteries accounting for the vast majority of their shipments. Assuming an average battery cell price of 0.5 yuan/Wh and annual shipments of 1,000 GWh, a 2% tax rate translates to an additional annual tax burden of approximately 10 billion yuan at the cell level. At present, gross margins of power battery cell enterprises are generally compressed to around 10% or even lower, making this cost increase significant. In terms of pass-through, top-tier players, leveraging economies of scale and stronger bargaining power, are expected to pass on part of the tax burden to downstream automakers. However, second- and third-tier enterprises have limited room to negotiate, so their profit margins may come under further pressure, potentially intensifying industry divergence. After the tax rate rises to 4% in 2027, cost pressure will be significantly magnified, likely accelerating the rationalization of inefficient capacity. 2. Targeted Tax Exemptions for Frontier Technologies: Sodium-Ion and Solid-State Batteries Enjoy a “Policy Window” The announcement specifies that from September 1, 2026 to December 31, 2028, sodium-ion batteries, solid-state batteries, fuel cells, as well as perovskite, tandem, and gallium arsenide solar cells in the PV sector will be exempt from consumption tax. This arrangement directly targets frontier technology pathways that have not yet been industrialized on a large scale but hold strategic significance: Sodium-ion batteries are at a critical stage of transitioning from demonstration applications to large-scale mass production. The exemption will effectively lower the initial comprehensive production costs, narrow the cost gap with lithium-ion batteries, and accelerate their penetration in applications such as low-speed vehicles. Solid-state batteries, as the core direction for next-generation power batteries, remain in the R&D and small-batch trial production stage transitioning from semi-solid to all-solid-state. The tax exemption helps reduce trial-and-error costs and accelerate industrialization. The core logic is: tax mature technologies, and exempt frontier technologies from tax. Exempting frontier technologies that are still in the early stages of industrialization reflects a policy orientation of “using tax supplements from mature technologies to support frontier technologies, enabling them to move forward with less burden,” thereby guiding capital and resources toward technological iteration. In the short term, at the initial stage of the lithium battery consumption tax, cost side, battery cell enterprises will be under pressure and will manage by raising prices or optimizing their product mix. This cost increase is particularly erosive to the profits of second- and third-tier enterprises, and some marginal capacity may face break-even pressure. In terms of production scheduling pace, ahead of the September 1 start date, battery cell manufacturers may exhibit an “installation rush” effect involving concentrated shipments and advance stockpiling, potentially driving August production figures sharply higher in the short term, while September production schedules will face a phased pullback. In terms of price pass-through, top-tier players still have some cushion for negotiation, but smaller cell makers will face greater resistance in passing the tax burden to automakers and will need to absorb most of the costs themselves. In terms of product mix, production scheduling priorities for low-margin categories may be passively downgraded, accelerating the industry reshuffle. In the long term, after the tax rate rises to 4%, industry-wide cost pressure will be significantly magnified. Combined with the scheduled expiration of the tax exemption window for frontier technologies at the end of 2028, whether sodium-ion and solid-state batteries can achieve cost reductions at scale by then will become a critical factor in determining their competitiveness. The policy sends a very clear signal: the state’s regulatory logic for the battery industry is shifting from “universal support” to “differentiated guidance,” with technology leaders reaping greater policy dividends.

[7.21 Morning Briefing] US media reports: US-Iran conflict intensifies, the Pentagon is accelerating the deployment of F-16 and F-35 fighter jets to the Middle East. Advisor to Iran’s Supreme Leader: If US forces continue operations, Iran may shift to a full-scale offensive. The most-traded SHFE nickel 2609 contract surged in early trading then pulled back slightly, and as of the morning close, it reported 130,720 yuan/mt, down 0.13%. As the US-Iran conflict escalates, shipping restrictions in the Strait of Hormuz have strengthened sulfur cost support. However, refined nickel inventories remain difficult to reduce. Both domestic and international inventories are still at high levels, and the destocking speed is slow. In the short term, the price of the most-traded SHFE nickel contract is expected to trade within the range of 125,000-130,000 yuan/mt.

China's Ministry of Finance, General Administration of Customs and State Taxation Administration announced that, effective September 1, 2026, consumption tax policies for certain battery products will be adjusted in phases. Under the new policy, sodium-ion batteries, solid-state batteries, fuel cells, and photovoltaic batteries including perovskite, tandem and gallium arsenide cells will be exempt from consumption tax.

[SMM Tin Midday Review: US-Iran Conflict Escalation Intensified Sentiment Divergence, the Most-Traded SHFE Tin Contract Consolidated at Highs in the Morning]

SMM Nickel July 20 News: Macro and Market News: (1) US media reported that the US-Iran conflict had intensified, and the Pentagon was stepping up the deployment of F-16 and F-35 fighter jets to the Middle East. An adviser to Iran's Supreme Leader said that if the US military continued its operations, Iran might shift to a full-scale offensive phase. (2) The Ministry of Finance, the General Administration of Customs, and the State Taxation Administration issued an announcement clarifying that, starting from September 1, 2026, the consumption tax policy for some battery products would be adjusted step by step. It stated that sodium-ion batteries, solid-state batteries, fuel cells, and solar cells including perovskite cells, tandem cells, and gallium arsenide cells would be exempt from consumption tax. Spot Market: On July 20, SMM #1 refined nickel price rose 750 yuan/mt from the previous trading day. For spot premiums, the average for Jinchuan #1 refined nickel was 1,650 yuan/mt, down 100 yuan/mt from the previous trading day, while the range for mainstream domestic electrodeposited nickel brands was -300 to 500 yuan/mt. Futures Market: The most-traded SHFE nickel contract (2609) rose in early trading before pulling back slightly, closing the morning session at 130,720 yuan/mt, down 0.13%. As the conflict between the US and Iran escalated, shipping in the Strait of Hormuz was restricted, strengthening sulfur cost support. However, refined nickel inventories remained difficult to digest, with both domestic and international inventories still at high levels and destocking slow. In the short term, the price range of the most-traded SHFE nickel contract is expected to be 125,000-130,000 yuan/mt.

[7.2 Morning Meeting Minutes] Iran claims the Strait of Hormuz will not reopen under US pressure; meanwhile, according to foreign media reports, Iran has secretly ordered the Houthis to blockade the Bab el-Mandeb Strait if the US attacks power facilities. The most-traded SHFE nickel 2609 contract plunged sharply in early trading, closing the morning session at 129,450 yuan/mt, down 1.14%. Bullish macro, policy, and cost-side factors, combined with strengthening technicals, give nickel prices rebound momentum, but weak demand and high inventories continue to cap the upside room. In the short term, the most-traded SHFE nickel contract is expected to trade in the range of 127,000-133,000 yuan/mt.

SMM July 18 news: In the metals market: Last Friday night, base metals on the domestic market nearly all rose. SHFE copper gained 0.15%, SHFE aluminum rose 0.22%, SHFE lead added 0.69%, SHFE zinc fell 0.85%, and SHFE tin jumped 1.57%. SHFE nickel slipped 0.28%. In addition, the most-traded alumina futures climbed 1.64%, and the most-traded aluminum alloy futures rose 0.67%. Last Friday night, ferrous metals mostly fell. Stainless steel dropped 0.3%, iron ore declined 0.46%, rebar lost 0.35%, and hot-rolled coil edged down 0.36%. For coking coal and coke: the most-traded coking coal futures gained 1.34%, and the most-traded coke futures added 0.56%. Last Friday night in overseas markets, LME base metals generally fell. LME copper dipped 0.11%, LME aluminum lost 0.33%, LME lead rose 0.96%, LME zinc fell 1.48%, LME tin gained 0.73%, and LME nickel dropped 0.38%. Last Friday night, in precious metals : COMEX gold rose 0.77%, but for the week, COMEX gold fell 2.2%. COMEX silver edged up 0.06%, with the contract posting a second straight weekly decline, down 6.56% for the week. Last Friday night, the most-traded SHFE gold contract gained 0.67%, but it fell for a second consecutive week, down 3.07% for the week; the most-traded SHFE silver contract rose 1.05%, but it fell for a second straight week, dropping 7.85% for the week. Data from the World Gold Council showed that gold prices weakened in June, erasing earlier gains, and H1 ended lower. Despite outflows in June, Chinese gold ETFs still saw significant inflows in H1, lifting their total assets under management (AUM) slightly to 243 billion yuan, while total holdings increased by 29 mt to 277 mt. In June, Chinese gold ETFs saw outflows of 15 billion yuan, their weakest monthly performance on record. (Source: Wallstreetcn APP) As of 8:45 am on July 18, the closing prices from last Friday’s overnight session: Macro front Domestic side: [Ministry of Finance and two other departments adjust consumption tax policies on certain batteries] On July 17, the Ministry of Finance announced that, starting from September 1, 2026, a consumption tax of 2% will be levied on mercury-free primary cells, nickel-metal hydride batteries (also known as NiMH batteries), lithium primary cells, lithium-ion batteries, and vanadium redox flow batteries; starting from September 1, 2027, the tax rate on these battery products will rise to 4%. Starting from April 1, 2027, a consumption tax of 2% will be imposed on solar cells; starting from April 1, 2028, the tax rate on solar cells will be 4%. From September 1, 2026 to December 31, 2028, consumption tax will be exempted for sodium-ion batteries, solid-state batteries, fuel cells, as well as for perovskite cells, tandem cells, and gallium arsenide cells among solar cells. [MIIT: Automotive Producers Required to Firmly Resist Irrational Competition and Strengthen Product Testing, Verification, and Safety Assessment] On July 17, the Equipment Industry Department I of the Ministry of Industry and Information Technology (MIIT) convened a symposium for key automotive producers, deploying efforts to further regulate competition order in the automotive industry, enhance production conformity and quality safety levels of automotive products, and carry out key tasks such as safety risk and hazard investigations and inspections and supervision of automotive products. (from Wall Street CN app) [Ministry of Housing and Urban-Rural Development: Advance Urban Renewal with High Quality and Intensify the Implementation of the Renovation of Old Urban Residential Communities] On July 17, the Party Leadership Group of the Ministry of Housing and Urban-Rural Development held an expanded study session of the theoretical study center group. The meeting stressed that carrying out urban work in the new era and on the new journey is a glorious mission with arduous tasks. It called for advancing urban renewal with high quality, promoting urban governance with high efficiency, and building “four-good” construction of good houses, good residential communities, good neighborhoods, and good urban districts to high standards. It emphasized intensifying efforts to implement livelihood-related projects such as the renovation of old urban residential communities, the construction of complete communities, the improvement of property service quality, the environmental remediation of back alleys and lanes, the development of pocket parks, and the opening and sharing of green spaces. It called for making great efforts to solve the most pressing difficulties and problems faced by the people, such as the installation of elevators, parking, and charging, striving to make people’s urban life more convenient, comfortable, and beautiful, and seizing the momentum to open up a new landscape in the modernization and construction of people-oriented cities. (China Construction News) [The “Several Measures to Further Promote the Development of ‘AI+Manufacturing’ in Shanghai” Issued] The Shanghai Municipal Commission of Economy and Informatization has issued the “Several Measures to Further Promote the Development of ‘AI+Manufacturing’ in Shanghai.” It mentions promoting breakthroughs in key and core technologies. Support will be provided for breakthroughs in technologies such as knowledge graph integration and text-to-3D parts design, focusing on frontier fields including industrial vertical large models, AI programming large models, physical AI, industrial agents, industrial software, and the industrial Internet, with a maximum support of 20 million yuan. For the R&D of comprehensive security solutions for industrial large models and agents, a maximum support of 10 million yuan will be provided. The measures aim to reduce the cost of using intelligent elements. Industrial intelligent computing cloud platforms are encouraged to provide manufacturing enterprises with low-code agent development platforms and free trials of industrial agents, distribute platform token trial coupons, and introduce computing power benefit packages for enterprises. Support will be given for renting non-affiliated intelligent computing resources to carry out the R&D and application of industrial large models and industrial agents, with a maximum subsidy of 40 million yuan. Support will be provided for the deployment of industrial vertical applications by calling on third-party large models or adopting privately deployed third-party large models, with a maximum subsidy of 5 million yuan. Support will also be given for the procurement of high-quality corpora to facilitate the R&D and application of industrial vertical large models, industrial AI agents, etc., with a maximum subsidy of 5 million yuan. (Jin10 Data App) In terms of the US dollar: Last Friday overnight, the US dollar index rose 0.03% to 100.76. On the weekly chart: the US dollar index fell, dropping 0.2% for the week. According to the latest survey, US consumer sentiment surged to a five-month high in early July, boosted by falling gasoline prices. The survey results released on Friday showed that the University of Michigan's preliminary consumer sentiment index for July rose to 54.4 from 49.5 in June, compared to market expectations of 51. From June through early July, gasoline prices fell steadily, effectively easing household budget pressures. However, renewed tensions in the Middle East have since begun to push oil prices higher and clouded the inflation outlook further. The survey's coverage period was from June 23 to July 13, though the report noted that more than 70% of responses were completed before the US carried out airstrikes on Iran in early July. The improvement in consumer confidence was broad-based across age and income groups as well as political party affiliations. (from Wall Street News App) US housing starts surged in June after a sharp decline in the previous month, driven primarily by a rebound in apartment construction. Official data released on Friday showed that housing starts increased 19% to a 1.43 million annualized rate, the highest level since March and exceeding economists' expectations. Multifamily housing starts jumped more than 76% to a 532,000 annualized rate, following a nearly 40% plunge the previous month. Meanwhile, single-family housing starts fell 0.2%, declining again after builders experienced an overall sluggish spring. The rebound in multifamily construction underscores the month-to-month fluctuations in the data, especially in the apartment sector. However, high home prices and high mortgage rates have been suppressing demand for single-family homes, and these factors may also be supporting apartment demand. At the same time, single-family homebuilders have generally been facing high inventory and weak demand. This has forced many builders to entice buyers through sales incentives. Simona Mocuta, chief economist at State Street Global Advisors, said the US dollar has been supported this year by safe-haven inflows and market pricing of US Fed rate hikes, but these factors have already been priced into the exchange rate, so the dollar is set to resume its multi-year depreciation trend. Her baseline forecast is that the US Fed will keep interest rates unchanged for the entire year, but Mokuta says the risk of one rate hike remains. Even if a hike occurs, it has already been priced into the US dollar and would thus have little additional impact; if a hike fails to materialize, it would weaken the US dollar. As concerns over the US fiscal outlook persist, the US dollar will return to its long-term depreciation trend. (from Wallstreetcn APP) On the macro front: This week will see the release of China's one-year loan prime rate as of July 20, Germany's June PPI MoM, Canada's June CPI MoM, US June Conference Board Leading Index MoM, Switzerland's June trade balance, UK ILO unemployment rate for the three months to May, UK June public sector net borrowing, UK June unemployment rate, UK June claimant count change, Germany's July ZEW economic sentiment index, Eurozone's July ZEW economic sentiment index, US ADP employment change for the week ending July 4, UK June CPI MoM, UK June RPI MoM, China's June SWIFT RMB global payment share, Australia's seasonally adjusted unemployment rate for June, UK July CBI industrial orders balance, Eurozone's ECB deposit facility rate as of July 23, Eurozone's ECB main refinancing rate as of July 23, Canada's May retail sales MoM, US initial jobless claims for the week ending July 18, Eurozone's July consumer confidence index flash estimate, UK July GfK consumer confidence index, Japan's June core CPI YoY, Germany's August GfK consumer confidence index, UK June seasonally adjusted retail sales MoM, France's July manufacturing PMI flash estimate, Germany's July manufacturing PMI flash estimate, Eurozone's July manufacturing PMI flash estimate, UK July manufacturing PMI flash estimate, UK July services PMI flash estimate, US July S&P Global manufacturing PMI flash estimate, US July S&P Global services PMI flash estimate, and US June new home sales annualized, among other data. Additionally, this week: The ECB will announce its interest rate decision; ECB President Lagarde will hold a press conference on monetary policy. On the crude oil front: Last Friday, both crude oil futures surged in overnight trading, with WTI up 4.46% and Brent up 4.78%. On the weekly chart: WTI futures posted a second straight weekly gain, rising 14.51% for the week; Brent futures also rose for a second consecutive week, jumping 16.12% for the week. On Friday, the Middle East situation further deteriorated, and escalating geopolitical tensions drove crude oil sharply higher. Data released by international services provider Kpler on the 17th showed that vessel traffic through the Strait of Hormuz continued to weaken on the 16th, with the confirmed number of ships passing through the strait that day dropping to 8, the lowest level in nearly three weeks. (From Wallstreetcn APP) IEA Executive Director Birol Fatih warned on the 16th that if oil shipments via the Strait of Hormuz are not restored within weeks, global energy security will be in jeopardy. According to UK sources, Birol said at an event held by the Council on Foreign Relations that oil supply security remains a key concern, and if the situation in the Strait of Hormuz does not improve in the coming weeks, the world should be worried. He said the measures taken by some countries "cannot last forever"; even if the US significantly increases oil production, it will be far from enough to offset the supply gap caused by the blockage in the Strait of Hormuz. (CCTV News) Oilfield services company Baker Hughes said US energy firms this week added oil and natural gas rigs for the fifth consecutive week, the first such streak since early June, bringing the total count to its highest since April 2025. As an early indicator of future output, the total rig count rose by 7 to 588 in the week to July 17. Baker Hughes said this week's increase pushed the total rig count up by 44 rigs, or 8%, compared to the same period last year. Baker Hughes said oil rigs rose by 7 to 452 this week, the highest since May 2025; natural gas rigs were unchanged at 126, and miscellaneous rigs were unchanged at 10. (From Wallstreetcn APP) Notably: NYMEX WTI August crude oil futures will be affected by contract rollover, with the final floor trading completed at 2:30 on July 22 and the final electronic trading completed at 5:00 AM. Please pay attention to the exchange's expiry and rollover announcements to manage risks. In addition, for some trading platforms, the WTI contract expiry is typically one day earlier than the official NYMEX expiry; please be attentive. Recommended Reading:

Overseas rare earth markets diverged this week between light and heavy types. Driven by the uptrend in China, terbium oxide and terbium metal prices rose, while light rare earths remained stable. Trading-wise, heavy rare earths saw few transactions due to export controls. On the industrial front, U.S. companies accelerated domestic recycling and purification, while European and Japanese firms advanced R&D on magnetic material recycling and rare-earth-free alternative technologies. Meanwhile, Indo-Pacific and South Korean players actively restructured supply chains, and resource development and processing projects were intensively launched in locations such as Malaysia, Thailand, and Brazil. The global “de-risking” layout for rare earths continued to deepen.

[SMM Aluminum Express News] Australia, Japan, the US and Alcoa have reached a final investment decision to develop a gallium production facility at Alcoa's Wagerup alumina refinery in Western Australia. The project will recover gallium from the existing Bayer process without requiring additional bauxite mining, supporting supply diversification for the critical mineral while adding value to the refinery's existing alumina operations.

The US National Science Foundation announced that the University of Alaska Fairbanks-led Critical Mineral Accelerator Engine will receive US$15 million during its first two years. Subject to performance milestones and future appropriations, total funding could reach as much as US$160 million over the next decade. The initiative will support technologies across mineral exploration, extraction, processing and purification, including artificial intelligence, advanced geoscience and microbial mining methods. Alaska hosts occurrences of 56 of the 60 minerals classified as critical by the US Geological Survey and is home to the Red Dog zinc-lead mine and numerous polymetallic prospects. Industry participants include Alaska Silver, whose Illinois Creek project hosts silver- and gallium-rich galena mineralisation. The programme is expected to support exploration, processing innovation and workforce development for Alaska’s zinc, lead and other critical mineral resources.