China Northern Rare Earth announced on the evening of July 9: In accordance with the pricing method for rare earth concentrates and the Q2 2026 rare earth oxide prices, and following calculation and approval at the 14th General Manager’s Office Meeting of the company in 2026, the company’s Q3 2026 rare earth concentrate transaction price was adjusted to a tax-exclusive 38,565 yuan/mt (dry basis, REO=50%), with the tax-exclusive price changing by 771.3 yuan/mt for every 1% increase or decrease in REO. Compared with the Q2 rare earth concentrate transaction price of 38,804 yuan/mt, the price of 38,565 yuan/mt represents a decrease of 239 yuan/mt, a QoQ decline of 0.62%. As learned by SMM, this decline was broadly in line with market expectations. The Q3 rare earth concentrate transaction price between China Northern Rare Earth and Bao Gang United Steel decreased by 0.62% QoQ China Northern Rare Earth announced on the evening of July 9: The company convened the 25th Meeting of the 8th Board of Directors on March 14, 2023 and the First Extraordinary General Meeting of 2023 on March 30, 2023, which reviewed and approved the “Proposal on the Pricing Mechanism for Daily Related-Party Transactions of Rare Earth Concentrates and the 2022 Execution and 2023 Estimates”. The company and its related party, Inner Mongolia Bao Gang United Steel Co., Ltd., agreed that starting from April 1, 2023, with the rare earth concentrate pricing formula unchanged, the company’s management would calculate and adjust the rare earth concentrate price within the first ten days of each quarter based on the pricing formula, and re-sign the rare earth concentrate supply contract or supplementary agreement and issue an announcement. For details, please refer to the announcements such as the “Announcement of China Northern Rare Earth on the Pricing Mechanism for Daily Related-Party Transactions of Rare Earth Concentrates and the 2022 Execution and 2023 Estimates” and the “Resolution Announcement of the First Extraordinary General Meeting of China Northern Rare Earth in 2023” published on China Securities Journal, Shanghai Securities News, Securities Times, and the website of the Shanghai Stock Exchange on March 15, 2023 and March 31, 2023, respectively. In accordance with the pricing method for rare earth concentrates and the Q2 2026 rare earth oxide prices, and following calculation and approval at the 14th General Manager’s Office Meeting of the company in 2026, the company’s Q3 2026 rare earth concentrate transaction price was adjusted to a tax-exclusive 38,565 yuan/mt (dry basis, REO=50%), with the tax-exclusive price changing by 771.3 yuan/mt for every 1% increase or decrease in REO. Compared with the Q2 rare earth concentrate transaction price of 38,804 yuan/mt, the price of 38,565 yuan/mt represents a decrease of 239 yuan/mt, a QoQ decline of 0.62%. China Northern Rare Earth announced on the evening of April 10: In accordance with the pricing method for rare earth concentrates and the Q1 2026 rare earth oxide prices, and following calculation and approval at the 6th General Manager’s Office Meeting of the company in 2026, the Q2 2026 rare earth concentrate transaction price was adjusted to a tax-exclusive 38,804 yuan/mt (dry basis, REO=50%), with the tax-exclusive price changing by 776.08 yuan/mt for every 1% increase or decrease in REO. 38,804 yuan/mt, compared with the rare earth concentrate transaction price of 26,834 yuan/mt in Q1 this year, rose 11,970 yuan/mt, a QoQ increase of 44.61%. China Northern Rare Earth's announcement on the evening of January 9 showed: According to the rare earth concentrate pricing method and rare earth oxide prices in Q4 2025, after calculation and approval by the company’s first general manager office meeting in 2026, the rare earth concentrate transaction price for Q1 2026 was adjusted to 26,834 yuan/mt (dry basis, REO=50%), excluding tax, and the tax-excluded price will increase or decrease by 536.68 yuan/mt for every 1% change in REO. 26,834 yuan/mt, compared with the rare earth concentrate transaction price of 26,205 yuan/mt in Q4 2025, rose 629 yuan/mt, a QoQ increase of 2.4%. The rare earth concentrate transaction price of Bao Gang United Steel and China Northern Rare Earth in Q3 edged down QoQ, ending a streak of seven consecutive quarterly increases since Q4 2024! In Q4 2024, the rare earth concentrate transaction price between Bao Gang United Steel and China Northern Rare Earth rose 6.22% QoQ. In Q1 2025, it rose 4.7% QoQ; in Q2 2025, it rose 1.11% QoQ; in Q3 2025, it rose 1.5% QoQ; and in Q4 2025, it rose 37.13% QoQ. In Q1 2026, it rose 2.4% QoQ; in Q2 2026, it rose 44.61% QoQ; but in Q3 2026, it fell 0.62% QoQ. The slight QoQ decline in the average Pr-Nd oxide price in Q2 drove the QoQ edge down in the rare earth concentrate transaction price in Q3. As stated in China Northern Rare Earth's announcement, according to the rare earth concentrate pricing method and rare earth oxide prices in Q2 2026, after calculation and approval by the company’s 14th general manager office meeting in 2026, the company's rare earth concentrate transaction price for Q3 2026 was adjusted to 38,565 yuan/mt (dry basis, REO=50%), excluding tax, and the tax-excluded price will increase or decrease by 771.30 yuan/mt for every 1% change in REO. In Q2, the average quarterly price of Pr-Nd oxide edged down. The average price of Pr-Nd oxide on June 30 was 742,500 yuan/mt, up 21,000 yuan/mt from 721,500 yuan/mt on March 31, a Q2 increase of 2.91%. However, the quarterly average price of Pr-Nd oxide in Q2 this year was 735,466.67 yuan/mt, down 10,488.69 yuan/mt QoQ from the Q1 average of 745,955.36 yuan/mt, a QoQ decline of 1.41%. Given that the quarterly average price of Pr-Nd oxide in Q2 declined by 1.41% QoQ compared to Q1, the Q3 rare earth concentrates price of China Northern Rare Earth and Bao Gang United Steel falling 0.62% QoQ is relatively in line with market expectations. Currently, the price of Pr-Nd oxide remains stable. According to SMM quotes, the average price of Pr-Nd oxide on July 9 was 764,000 yuan/mt, flat compared to the previous trading day. Recently, inquiry activity in the Pr-Nd oxide market has decreased, and the overall trading atmosphere is somewhat sluggish. Against this backdrop, the offers of oxide suppliers showed a slight decline compared to the afternoon of the 8th; however, due to the still-existing bullish sentiment in the market, the decline is limited, and prices are basically flat compared to the morning of the 8th. In the metal market, as oxide prices fluctuated little, the offers of metal suppliers also did not see significant adjustments, and overall prices also remained stable. However, overall market inquiry activity decreased compared to the 8th, and downstream magnetic material enterprises adopted a more wait-and-see attitude in procurement. In the short term, supported by the bullish sentiment in the market, Pr-Nd product prices are likely to show a trend of drifting higher. In the medium to long term, entering Q3, as the rare earth industry gradually moves out of the traditional off-season, market confidence in demand during the traditional peak season will also provide some support to rare earth prices. Going forward, attention should be paid to the pace of demand recovery leading to changes in market restocking, as well as changes in macro sentiment! Recommended Reading:

[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.

The most significant change in the imported copper concentrate market in the first half of 2026 emerged during the mid-year term-contract negotiations. According to SMM, Antofagasta, a leading Chilean mining company, and several major Chinese smelters finalized the pricing mechanism for their mid-year copper concentrate term contracts on July 1. Rather than continuing with the traditional fixed-TC approach, the parties adopted an index-linked pricing mechanism.Chinese smelters had already agreed with Antofagasta on historically low term-contract treatment and refining charges of US$0 per dry metric tonne and US¢0 per pound in 2025. The further introduction of index-based pricing in the 2026 mid-year negotiations indicates that the pricing framework for imported copper concentrate term contracts is undergoing a structural transformation, against a backdrop of persistently and deeply negative spot TCs and steadily strengthening pricing power on the mine side. At a more fundamental level, the change in term-contract pricing reflects the persistent mismatch between mine-supply growth and the expansion of smelting demand. SMM estimates that global sulfide copper concentrate supply will increase by approximately 250,000 tonnes of contained copper in 2026 compared with 2025, representing growth of around 1.3%. By contrast, newly commissioned and expanded primary smelting capacity in China is expected to generate approximately 800,000 tonnes of additional concentrate demand on a contained-copper basis.The increase in mine supply is therefore significantly smaller than the expansion in smelter demand. Meanwhile, factors including the slower-than-expected restart of Grasberg, the continued absence of a full restart at Cobre Panamá, declining ore grades at mature Chilean mines, and the lingering effects of seismic activity at Kamoa-Kakula kept the imported copper concentrate spot market extremely tight throughout the first half of the year.SMM estimates that the global sulfide copper concentrate market will record a supply deficit of approximately 610,000 tonnes of contained copper in 2026. The shortage may not begin to ease until around 2029, when production from a number of new mine projects is expected to come on stream. At the same time, elevated sulfur and sulfuric acid prices have provided an important floor under copper smelter profitability and increased smelters’ ability to absorb deeply negative TCs, at least temporarily. On July 3, the SMM China Copper Smelter Sulfuric Acid Index stood at RMB 1,789 per tonne, up RMB 886 per tonne from RMB 903 per tonne on January 9. The rise in sulfuric acid prices since the beginning of 2026 has become an important earnings driver for Chinese copper smelters and has helped sustain high refined-copper output. Under the combined influence of the mine-smelter supply-demand mismatch and strong by-product margins, spot TCs for imported copper concentrate continued to fall during the first half of 2026. The monthly SMM Imported Copper Concentrate Index averaged negative US$121.44 per dry metric tonne in June, down US$18.31 per dry metric tonne from negative US$103.13 per dry metric tonne in May. On a weekly basis, the SMM Imported Copper Concentrate Index was reported at negative US$113.83 per dry metric tonne in early June and subsequently declined continuously to negative US$124.45 per dry metric tonne on June 26. On July 3, the weekly index fell further to negative US$128.25 per dry metric tonne, down US$3.80 per dry metric tonne from the previous assessment. The successive declines through the negative US$100 and negative US$120 per dry metric tonne thresholds demonstrate that the shortage of tradable spot concentrate continued to intensify. I. Supply: New Supply Falls Short of Expectations as Mine-Side Disruptions Continue to Constrain Tradable Availability Although several global copper projects were scheduled to deliver incremental concentrate supply in the first half of 2026, actual production growth came on stream significantly more slowly than the market had previously expected.The central issue on the supply side was not any single mine incident. Rather, disruptions at major mines, declining grades at mature operations, slower-than-expected ramp-ups at new projects, and changes in trade flows collectively reduced the volume of concentrate available for purchase in China’s spot market. Regarding Cobre Panamá, the Panamanian government approved First Quantum Minerals in April to remove, process and export stockpiled ore that had been mined before the operation was suspended. According to SMM, however, the current progress at Cobre Panamá mainly concerns the treatment of existing stockpiles and does not represent a full restart of mining operations.The mine remains subject to complex disputes involving mining rights, taxation, environmental requirements, local communities and political considerations. Consequently, even if a portion of the stockpiled material enters the market during the second half of 2026, its contribution to improving the global copper concentrate balance is expected to remain limited.Related analysis is available in the SMM article, “Cobre Panamá Copper Mine: From a World-Class Mine to a Shutdown Impasse—SGS Audit Signals the Possibility of a Restart”: https://hq.smm.cn/copper/content/103965399 Grasberg remains one of the largest variables affecting global copper concentrate supply in 2026. At the beginning of the year, Freeport-McMoRan forecast approximately 3.4 billion pounds of copper sales for 2026, based on the assumption that the Grasberg Block Cave would restart and ramp up in stages from the second quarter.Because the restart underperformed expectations, Freeport subsequently lowered its 2026 copper sales guidance to approximately 3.1 billion pounds in its first-quarter report. For the imported copper concentrate market, the significance of Grasberg extends beyond the mine’s headline production figures. Other important factors include the proportion of concentrate absorbed by Indonesia’s domestic smelting sector, PTFI’s smelter inventory arrangements, and the actual quantity of material available for shipment to China’s spot market. Should the recovery at Grasberg continue to fall short of expectations in the second half of the year, the shortage of clean spot concentrate is unlikely to ease materially. In Africa, the effects of seismic activity at Kamoa-Kakula remain ongoing. Ivanhoe Mines previously issued 2026 copper production guidance of 380,000–420,000 tonnes for Kamoa-Kakula, followed by 500,000–540,000 tonnes in 2027. The company also stated that dewatering and rehabilitation work at the Kakula mine was continuing.Compared with the previous medium- to long-term target of annualized production exceeding 550,000 tonnes, however, the pace of production growth in 2026 has slowed significantly. Kamoa-Kakula had been expected to be one of the most important sources of global copper concentrate supply growth in recent years. The slowdown in its production ramp-up has therefore further reduced the potential for mine-supply growth to support a recovery in TCs. In Chile, declining grades at mature mines, transitions toward deeper underground mining, and operational accidents continued to constrain supply flexibility. The effects of the 2025 cave-in at El Teniente extended into 2026. Codelco previously stated that the accident had resulted in the loss of tens of thousands of tonnes of copper production in 2025 and would continue to affect the subsequent recovery schedule.The incident illustrates the structural challenges facing Chile’s large and mature mining operations in areas such as deep-level mining, ground-pressure management, and the timely delivery of replacement and mine-life-extension projects. In addition to El Teniente, several other major Chilean mines continued to face declining grades, throughput fluctuations and maintenance-related disruptions, limiting the recovery potential of Chilean clean-concentrate supply. Peru’s supply performance was comparatively more resilient than Chile’s, although incremental production remained highly concentrated among a limited number of operations. Major mines such as Antamina and Las Bambas benefited during certain periods from higher ore grades, improved recoveries and operational normalization, supporting Peru’s overall copper production.From the perspective of the imported spot market, however, Peruvian supply remains exposed to community disruptions, transportation-corridor interruptions, mine-grade transitions and unstable shipment schedules. Moreover, because much of the incremental production is concentrated among a small number of large mines, it is insufficient to fully offset supply losses associated with Grasberg, Cobre Panamá and mature Chilean mines. In Mongolia, the ramp-up of the Oyu Tolgoi underground mine represents one of the relatively few clearly identifiable sources of incremental global mine supply in 2026. Rio Tinto disclosed that its copper production increased by 11% year on year in 2025, primarily due to the strong ramp-up at Oyu Tolgoi.Nevertheless, while additional output from Oyu Tolgoi is contributing to global supply growth, the incremental volume from this single project remains insufficient to reverse the overall tightness in the copper concentrate spot market, given the larger increase in Chinese smelting demand and recurring disruptions at other major mines. According to SMM estimates, disruptions at major global copper mines and incremental production falling short of expectations will have a combined impact of approximately 480,000 tonnes of contained copper in 2026. Uncertainty surrounding the realization of mine supply therefore remains the primary factor driving imported copper concentrate TCs lower. From a trade-flow perspective, China’s copper concentrate imports from Chile and Peru both declined to varying degrees during the first half of 2026. According to customs data, China imported 3.7640 million tonnes of copper concentrate from Chile during January–May 2026, down 228,000 tonnes, or 5.71%, year on year.Imports from Peru totaled 3.1002 million tonnes during the same period, representing a year-on-year decrease of 147,900 tonnes, or 4.55%. Lower arrivals from the principal South American origins intensified competition among Chinese smelters for alternative feedstocks, blended concentrates, land-transported concentrates and off-specification materials. China’s total imports of copper ores and concentrates amounted to 12.2758 million tonnes during January–May 2026, down 1.01% year on year. The modest decline partly reflected the relatively high comparison base in the corresponding period of 2025. Other contributing factors included strong consumption of copper anode and blister copper in the first quarter, temporary adjustments to some smelters’ raw-material mix, and changes in the arrival schedule of term-contract cargoes.The decline in headline import volumes should therefore not be interpreted simply as evidence of materially weaker concentrate demand from domestic smelters, nor does it have a direct one-to-one relationship with spot TC movements.For the spot market, the more important variables are the marginal volume available outside term contracts, the share of mainstream clean concentrate in the available supply pool, and smelters’ periodic inventory-replenishment requirements. During the first half of 2026, new smelting capacity, continued demand for off-contract inventory replenishment, and frequent mine disruptions kept the spot market tight even though the decline in apparent import volumes was limited. Spot TCs consequently remained under sustained downward pressure. II. Demand: China’s Smelting Expansion Continues While Production Cuts Remain Fragmented On the demand side, Chinese copper smelters remain the principal source of incremental global copper concentrate consumption. Although deeply negative TCs continued to compress core smelting margins during the first half of 2026, and some smelters temporarily reduced operating rates because of maintenance, feedstock constraints and processing-margin losses, the continued commissioning of new and expanded primary smelting capacity kept concentrate demand relatively inelastic. According to SMM statistics, new and expanded primary smelting capacity in China in 2026 is expected to correspond to approximately 800,000 tonnes of contained copper.Newly commissioned capacity typically requires substantial initial feedstock inventories. Even when spot TCs are deeply negative, new production lines must continue purchasing concentrate to ensure operational stability, complete equipment commissioning and ramp-up, and maintain market share. As a result, the practical effectiveness of production cuts by smelters as a mechanism for restoring TCs has been significantly weakened. The Chinese smelting sector in the first half of 2026 was characterized by the coexistence of maintenance-related disruptions and demand generated by capacity expansion. On the one hand, several smelters scheduled maintenance during the second quarter, temporarily reducing concentrate consumption. On the other hand, ramp-ups at newly commissioned facilities, term-contract obligations, low inventory safety margins and strong sulfuric acid earnings prevented smelters from implementing coordinated production cuts.Particularly in an environment where imported concentrate inventories remained structurally tight, some smelters continued to make essential market inquiries to secure production continuity, even when they reduced the frequency of their spot purchases. III. Smelting Economics: Strong Sulfuric Acid Margins Increase Tolerance for Negative TCs, but Volatility Risks Are Rising The earnings structure of copper smelters changed materially during the first half of 2026. Traditionally, smelter profitability has primarily been derived from TC/RC income and credits from gold, silver and other by-products. With spot TCs for imported copper concentrate moving deeply into negative territory, however, processing-fee income fell sharply and sulfuric acid margins became significantly more important. Overall copper smelting margins were weaker in the early part of the first half and improved later in the period. Declining TCs imposed substantial pressure on profitability, but elevated sulfuric acid prices, strong precious-metal prices and improved returns from certain other by-products provided a partial offset.Approximately 3.5–4.0 tonnes of sulfuric acid are produced as a by-product for every tonne of refined copper output. When sulfuric acid prices are high, acid earnings can substantially offset the impact of negative TCs and rising smelting costs. Nevertheless, according to SMM estimates, spot-based smelting margins at Chinese copper smelters have now approached break-even, and smelters have become noticeably less willing to purchase spot cargoes at increasingly unfavorable TCs. The rise in sulfuric acid prices has mainly been driven by two factors. First, geopolitical disruptions in the Middle East, tight sulfur supply and higher import costs raised the cost base of sulfuric acid production. Second, demand from phosphate fertilizers, chemicals, hydrometallurgical operations and battery-material producers provided broad-based downstream support.The sharp rise in sulfuric acid prices has reshaped the economics of copper smelting in China, with acid earnings accounting for a substantially larger proportion of smelters’ non-TC/RC income. This was also an important reason why Chinese smelters did not implement large-scale voluntary production cuts during the first half of 2026 despite the continued decline in TCs. The support provided by sulfuric acid margins is not without risk, however. Should geopolitical disruptions ease in the second half of the year, sulfur supply recover, or restrictions on Chinese sulfuric acid exports result in more material being redirected to the domestic market, sulfuric acid prices could retreat from their elevated levels.If acid margins narrow while copper concentrate TCs remain deeply negative, pressure on smelter profitability will become more visible again. Some higher-cost smelters may respond by extending maintenance periods, reducing utilization rates or cutting spot concentrate purchases. Sulfuric acid prices will therefore be one of the key variables determining whether TCs can stabilize during the second half of the year. IV. Spot Market: Frequent Mine Tenders and the Emergence of Index-Minus Pricing Trading activity in the imported copper concentrate spot market was uneven during the first half of 2026, but mine tenders and trader offers remained important channels for price discovery. As spot TCs continued to decline, outright fixed-price transactions repeatedly established new market lows, while index-minus pricing gradually became the dominant quotation format. Since the second quarter, trader offers have increasingly been expressed as an average of the SMM and Fastmarkets indices minus an additional differential. This pricing method indicates that, in an environment of continuously declining spot TCs, concentrate sellers increasingly prefer index-linked formulas that preserve their exposure to further downward movements in TCs. Smelters’ purchasing behavior remained conflicted. On the one hand, deeply negative TCs continued to compress smelting margins, limiting smelters’ willingness to accept expensive spot concentrate carrying extremely unfavorable processing terms. Some companies therefore reduced the frequency of their active inquiries.On the other hand, ramp-ups at new smelting facilities, insufficient inventory safety margins and uncertainty surrounding term-contract arrivals meant that some smelters still needed to replenish stocks to meet essential production requirements. Consequently, the market did not experience a collective withdrawal of buyers sufficient to drive a meaningful recovery in TCs. Instead, continuously lower mine-tender settlements pushed the spot index further into deeply negative territory. V. H2 Outlook: Limited Marginal Supply Recovery and Persistently Deeply Negative TCs Looking ahead to the second half of 2026, the imported copper concentrate spot market will continue to be driven by the interaction between the actual realization of mine-supply recovery and the resilience of Chinese smelting demand.On the supply side, the treatment of Cobre Panamá stockpiles, progress in the Grasberg restart, incremental production from Oyu Tolgoi, and shipment stability at major Peruvian mines may provide some marginal improvement. Based on current developments, however, Cobre Panamá has not achieved a full restart, the Grasberg recovery schedule has already been revised downward, production growth at Kamoa-Kakula has slowed, and mature Chilean mines remain exposed to declining grades and safety-related disruptions. The conditions required for a substantial easing of the global copper concentrate market are therefore not yet in place. On the demand side, new and expanded Chinese primary smelting capacity will continue to support structurally strong concentrate consumption. Although some smelters may temporarily reduce production because of losses, maintenance or feedstock constraints, the ramp-up of newly commissioned projects, the fulfillment of term contracts, sulfuric acid margins and regional refined-copper price differentials will continue to weaken the impact of production cuts on TCs.Should the effect of maintenance outages gradually diminish during the third quarter while newly commissioned capacity continues to ramp up, China’s demand for imported copper concentrate is likely to remain elevated on a sequential basis. Sulfuric acid prices will remain a key variable for smelting profitability in the second half of the year. Should sulfuric acid prices remain elevated or rise further, smelters will continue to demonstrate a relatively strong capacity to absorb negative TCs, limiting the potential for a recovery in spot TCs. Conversely, should sulfuric acid prices retreat from their highs, pressure on smelter profitability will increase again. Some smelters may respond by extending maintenance, cutting operating rates or reducing spot purchases, potentially allowing TCs to stabilize or recover modestly for a period. In the spot market, mine-tender results will remain an important leading indicator for TC movements in the second half of the year. As term-contract pricing becomes increasingly index-linked and more spot transactions adopt index-minus formulas, the SMM Imported Copper Concentrate Index is expected to play an even stronger role as the principal pricing anchor for market transactions. Should mine-tender settlements remain deeply negative, spot TCs may fall further. Conversely, if incremental volumes from the Grasberg recovery, Cobre Panamá stockpile processing and Oyu Tolgoi materialize at the same time, while maintenance activity among smelters increases, TCs may stage a temporary recovery. Overall, some marginal improvement in imported copper concentrate supply is possible during the second half of 2026. Nevertheless, given the continued commissioning of new Chinese smelting capacity, the shortage of tradable concentrate, and the support that strong sulfuric acid margins provide to smelter operating rates, a sustained and substantial recovery in spot TCs appears unlikely. Spot TCs for imported copper concentrate are therefore expected to remain volatile within deeply negative territory during the second half of the year. Any temporary recovery will depend largely on the actual realization of mine restarts, the extent to which smelters implement maintenance and production cuts, and changes in sulfuric acid profitability.

The overseas secondary aluminum market shifted from supply-driven gains to demand-led corrections in H1 as geopolitical risks eased and downstream demand remained weak. At the same time, the UAE, the EU and the US introduced measures to strengthen domestic scrap resource management, reinforcing aluminum scrap's strategic role in global supply chains. In H2, SMM expects demand recovery to be the key driver of prices, while policy will continue to shape trade flows and premium scrap availability.

Overall, the main theme of the Indonesia and Philippines nickel ore market in H1 2026 can be summarized as follows: policy is redefining Indonesia’s supply boundary, HPM is redefining resource value, ore grade decline is redefining the long-term cost floor, and Philippine ore is increasingly acting as the marginal balancing source.

Overseas PV Markets Enter a Policy-Driven Reset After H1 Demand Pull-Forward. Export tax changes, freight volatility, raw material costs, and policy deadlines lifted China TOPCon FOB prices in Q1 before weaker demand pulled them back to $0.108-0.112/W by late June.

[SMM Silicon-based PV Morning Meeting Minutes: Cell Production Schedule Fell Below Expectations, Module Inventory Edges Down] The transaction price ranges for various Topcon sizes remained stable, with 183N and 210R operating steadily at 0.265-0.27 Yuan/W. At this stage, the market's momentum for continuously selling goods at low prices has noticeably weakened. Combined with some producers releasing production cut plans, enterprises' willingness to actively dump goods at low prices has narrowed somewhat. Futures have entered a phase of weak stabilization in the short term. However, end-use demand has not shown substantial improvement, downstream procurement remains predominantly wait-and-see, and the market still allows for discussions on a small number of actual orders at low prices. The supply-demand pressure pattern in the industry has not been fully resolved.

Core View The main theme of lithium ore prices in H1 2026 was a sharp rally followed by a correction, rather than a one-way upward shift in the price center. The SMM spodumene concentrate index price (SC6, CIF China) started the year at around USD 2,000/t in January, briefly fell to USD 1,875/t in early February, then followed lithium carbonate prices higher and reached the year-to-date high of USD 2,780–2,840/t in mid-May, before retreating to the USD 2,385–2,480/t range in June. This trajectory almost fully mirrored lithium carbonate prices. Lithium carbonate spot prices started the year at around RMB 130,000/t, rose above RMB 200,000/t in May, and then pulled back to RMB 160,000–180,000/t in June. Lithium ore did not experience an independent rally throughout the period. It was pulled upward by lithium carbonate pricing via the futures market and then corrected as lithium carbonate prices peaked. Therefore, the starting point for understanding lithium ore prices in H1 is not resource-side supply and demand, but lithium carbonate pricing and market sentiment. One common misinterpretation needs to be corrected first: the strength in lithium ore prices in H1 was not the result of “tight effective supply pushing the price center higher.” The real drivers were the resonance of front-loaded demand, supply disruption expectations, and futures-driven sentiment. Front-loaded demand was triggered by export tax rebate adjustments; supply disruption expectations came from the repeated delays in Jianxiawo’s restart and Zimbabwe’s lithium concentrate export ban. When warehouse receipts accumulated and macro headwinds were released in May, and when Jianxiawo’s restart expectation materialized in June, prices corrected accordingly. After that, prices rebounded again as demand expectations improved. 1. Lithium Ore Followed Lithium Carbonate, While Spodumene-Based Conversion Margins Stayed Negative Throughout H1 The clearest evidence of the lithium ore pricing mechanism in H1 was not how much ore prices rose, but the fact that spot conversion margins for producing lithium carbonate from externally procured spodumene concentrate were negative for most of the period. The ore-salt margin inversion was structural and persistent in H1, rather than a short-lived squeeze on processing margins. The cause of this inversion directly points to the reversal of the pricing mechanism. Ore prices are no longer determined by a cost-plus model from the upstream side, which then determines lithium salt prices. Instead, lithium carbonate has become the pricing anchor, and ore prices are reverse-priced through the futures market. In early January, when lithium carbonate prices rallied on front-loaded demand and sentiment, ore prices were pushed higher at the same time. However, downstream lithium salt demand could not fully absorb the higher cost, and processing margins were squeezed into negative territory. In April, under the reality of ore-salt inversion and limited hedging opportunities, lithium salt producers relying on externally procured ore saw their ability to accept high-priced ore weaken significantly. For overseas miners, this means their realized selling prices are increasingly anchored by the profitability of China’s refining sector. This is not a narrative assumption, but a mechanism that can be verified month by month through spot margin data. The financialization of pricing was also visible in market transactions. When prices fell at the end of May, lithium salt producers became more active in pricing ore purchases. In June, the basis for new cargoes strengthened. Pricing based on futures quotation plus premium or discount has become the mainstream transaction model. Lithium salt producers tend to use pricing windows during price corrections to lock in ore supply. Whoever holds the pricing right controls the settlement timing, and in H1’s highly volatile two-way lithium carbonate market, this directly led to margin differentiation among different lithium salt producers. 2. The Three Drivers of the Rally and the Triggers of the Correction Front-loaded demand — export tax rebate adjustment. In January 2026, the Ministry of Finance and the State Taxation Administration clarified that the VAT export rebate rate for lithium battery products would be reduced from 9% to 6% from April 1, and fully removed from January 1, 2027. This policy directly stimulated downstream players to concentrate export shipments and inventory preparation before April, significantly front-loading demand into H1, especially supporting demand for energy storage and ternary-related materials. This was the most important demand-side catalyst in H1 and the one most easily overlooked by the “weak recovery” narrative. Supply disruption expectations — Jianxiawo and Zimbabwe. After Jianxiawo’s mining permit expired and production was halted in August 2025, its restart timeline was repeatedly pushed back in H1, continuously providing room for both bullish and bearish speculation in the market. Now that Jianxiawo’s restart has been confirmed, the largest bearish factor has been priced in, and the market’s focus has shifted back to whether demand can outperform expectations. In Zimbabwe, the lithium concentrate export ban at the beginning of the year disrupted shipment expectations. Positive progress was reported in late March, and by mid-May, Chinese-funded mining companies in Zimbabwe had completed export procedures and restarted shipments, easing the previous short-term tightness in African cargo arrivals. SMM expects the first batch of cargoes to arrive in China in mid-to-late July. Correction triggers — warehouse receipts, macro factors, and the materialization of restart expectations. After lithium carbonate prices rose above RMB 200,000/t in May, exchange warehouse receipts continued to accumulate and hit new highs, while concerns over off-balance-sheet inventory increased. Together with macro pressure from expectations of further Fed rate hikes, prices peaked and corrected in late May. On June 17, the approval of Jianxiawo’s land use application materialized, and clearer restart expectations further weighed on both ore and salt prices. By late June, according to SMM monthly production schedules, July demand showed resilience despite the seasonal lull, with both power and energy storage cell production schedules increasing month on month. Monthly lithium carbonate consumption remained at a high level, which restored some market confidence and pushed lithium prices higher again. 3. Supply-Side Reality: Imports Weakened Month on Month, but Cumulative Imports Still Increased; Australia Remained Dominant From January to May, spodumene imports showed a combination of weaker month-on-month momentum and continued year-on-year cumulative growth. On a monthly basis, imports reached 758,000 physical tonnes in April, down 9.5% month on month, and 680,800 tonnes in May, down 10.2% month on month. However, total spodumene imports in January–May reached around 3.66 million tonnes, up approximately 25% year on year. By origin, Australia remained the dominant source. China imported around 1.585 million tonnes from Australia in January–May, although May imports from Australia were around 330,000 tonnes, down approximately 15.2% year on year. The share of African supply continued to rise. On the shipment side, lithium concentrate shipments from Port Hedland to China showed clear quarter-end volume acceleration, with March shipments reaching around 122,000 tonnes, up 64.3% month on month. The marginal changes in overseas mines were concentrated in restarts and offtake agreements. Core Lithium restarted its Finniss project on May 20 and plans to ship the first batch of concentrate in Q4. Mineral Resources also restarted Bald Hill, with first spodumene output expected in July. These restart volumes are limited and will not change the short-term supply structure, but they reinforce the expectation of new supply materializing in H2 2026 and H1 2027. On the domestic side, SMM’s domestic sample mines produced 160,690 tonnes LCE in January–June. The restart of Jiangxi lepidolite mines was constrained by permitting procedures, environmental protection, profitability, and other factors, and did not fully ramp up in H1. 4. Migration of Long-Term Pricing Mechanisms: Floor Price Plus Pricing Optionality Has Become the Norm The long-term spodumene offtake agreements signed intensively in H1 provide direct contractual evidence of the financialization of ore pricing. In February, Pilbara Minerals signed a two-year offtake agreement with Tianhua New Energy, setting a floor price of USD 1,000/t, with no price ceiling, together with a USD 100 million interest-free prepayment. In the same period, Pilbara also signed a long-term agreement with Canmax. Yahua Group signed an offtake agreement with Brazil’s MGLIT, also with a minimum price of USD 1,000/t on a 6% basis. Liontown and Tianhua agreed on supply for 2027–2028, priced against a spodumene index. The common feature is a structure of USD 1,000/t floor price plus index or pricing optionality, with downside protection but no upside cap. The pricing benchmark is migrating from fixed website-based long-term pricing toward index-based and futures-linked pricing. This confirms that ore pricing is shifting from traditional long-term contracts to a more financialized structure of “floor price + pricing optionality + premium/discount.” This provides a contractual basis for assessing pricing transmission lags and distortions, and is also a key point for overseas investors to understand how China’s pricing system is penetrating upstream resources. 5. H2 Outlook H1 2026 provides a very clear methodological lesson for H2: lithium ore prices will not move independently from lithium carbonate. The core pricing variables for ore are not the nominal size of global lithium resources, but the dynamic matching among lithium carbonate futures, spot conversion margins for lithium salt producers using externally procured ore, domestic mine restart progress, African cargo arrival schedules, lithium salt producers’ feedstock inventories, and downstream material production schedules. In H1, lithium salt conversion margins remained negative for an extended period, yet ore prices did not fall quickly. Instead, they rose together with lithium carbonate prices under the influence of downstream restocking and supply disruption expectations. This shows that the H1 rally was not an independent strengthening of upstream fundamentals, but a synchronized industry-chain movement driven by front-loaded demand, delayed supply realization, and amplified futures sentiment. For H2 lithium ore analysis, the first step is to distinguish between “no shortage in total resources” and “short-term tightness in effective ore supply.” From a global resource perspective, Australia, Africa, Brazil, South American brines, and Chinese domestic mines all have incremental supply expectations, so there is no absolute shortage of resources. However, from the perspective of Chinese lithium salt production, what truly affects lithium carbonate supply is ore that can be purchased in time, arrive steadily, meet grade requirements, have controllable impurities, and match existing processing lines. If ore is locked in long-term contracts, still in transit, concentrated in trader inventories, or if high prices reduce lithium salt producers’ willingness to purchase, its contribution to short-term lithium salt supply will be weakened. Therefore, H2 analysis should not simply focus on mine output. It should track port inventories, traders’ saleable inventories, in-plant inventories at lithium salt producers using externally procured ore, vessel schedules, and long-term contract lock-up structures. On the domestic supply side, Jianxiawo is the core variable driving H2 market expectations, but its impact should not be simplified as “restart equals immediate supply.” After the mine was suspended, the market treated it as the key anchor for marginal domestic lepidolite supply. The real question in H2 is not the single event of whether it restarts, but whether the restarted volume becomes freely tradable ore. If the output is mainly consumed within CATL’s integrated system, the impact on the spot ore market and externally procured ore salt producers will be limited. Only if the output enters the spot market will it directly pressure ore prices and conversion margins. At the same time, the suspension and restart timeline of other Jiangxi lepidolite mines also needs to be incorporated into the framework. Previous public reports indicated that some mines in Yichun may first exhaust their annual mining quota during the license renewal process and then enter a production halt for license renewal. If these mines continue to be affected by permitting, environmental protection, safety, or profitability factors in H2, the supply elasticity of domestic lepidolite will be weaker than nominal capacity suggests. Conversely, if Jianxiawo and other Yichun mines move forward with restarts or license renewals in Q3–Q4, the marginal contribution of domestic ore to lithium carbonate supply will increase significantly and put pressure on high ore prices. In other words, domestic ore supply in H2 should not be treated as a single variable. It is jointly determined by Jianxiawo, other Yichun mines, and the operating rates of Jiangxi lepidolite-based lithium salt producers. For overseas ore, African supply remains one of the largest sources of H2 supply elasticity. In H1, the disruptions in Africa were more about policy, shipment, and arrival timing rather than the disappearance of resources. If shipments from Zimbabwe and other regions recover and previously delayed cargoes arrive in China in a concentrated manner, feedstock availability for lithium salt producers will improve and the bargaining power of ore sellers will weaken. However, if policy disruption, logistics cycles, grade volatility, or financing pressure cause arrivals to remain inconsistent, lithium salt producers using externally procured ore may still be unable to raise operating rates quickly even if margin repair expectations improve. Australian supply is relatively stable, but a large portion is locked under long-term contracts, limiting its marginal adjustment impact on the spot market. Brazilian and other emerging resources are more important for medium- and long-term expectations, while their short-term impact on Chinese lithium salt production depends on arrival timing and quality stability. Demand is the key factor determining downside support for ore prices. In H2, power batteries and energy storage will enter the traditional peak season, and the expansion and ramp-up of cell and material producers will continue to lift lithium salt consumption. In particular, lithium iron phosphate output, supported by energy storage and commercial vehicle demand, is expected to remain high and provide sustained demand for lithium carbonate. Although ternary materials are growing more slowly than LFP, they may still see periodic restocking driven by certain overseas and high-end power battery demand. If material producers’ expansion is realized smoothly, lithium salt producers will need to maintain high operating rates to meet long-term contract deliveries and spot orders, which will in turn support rigid ore procurement demand. Conversely, if terminal orders fail to absorb the expansion of materials, material producers may enter a destocking cycle, and lithium salt producers’ ore procurement will quickly weaken, causing ore prices to come under pressure earlier. Therefore, H2 lithium ore prices can be divided into four scenarios. Base case: margins gradually rebalance, and ore prices fluctuate at high levels before edging lower. Jianxiawo’s restart expectation materializes, but actual mining and beneficiation ramp-up is gradual. African cargo arrivals recover but do not form a concentrated shock. Power battery and energy storage production schedules remain high, while material producers’ expansion is gradually realized. In this scenario, lithium carbonate prices remain volatile at high levels, the margin inversion of externally procured ore salt producers slowly improves, and lithium ore prices follow lithium carbonate lower but do not collapse. The profits that were excessively concentrated in upstream resources and futures expectations in H1 begin to gradually flow back toward midstream refining. Correction scenario: supply materializes in a concentrated manner, and profits quickly flow back to midstream refining. If Jianxiawo ramps up faster than expected and part of its output enters the spot market; if other Yichun mines progress faster than expected in license renewals; if African ore arrives in China in a concentrated way; and if lithium carbonate warehouse receipts and futures market pressure intensify, ore prices will face stronger downside pressure. The transmission chain would be: lithium carbonate futures turn bearish → lithium salt producers become more cautious in procurement → rigid demand for externally procured ore slows → traders release saleable inventories → ore prices correct quickly. In this scenario, profits do not disappear; they shift quickly from upstream resources back to midstream refining, and overseas miners’ realized prices also come under pressure. The key is not the nominal restart volume of Jianxiawo, but whether the restarted ore is internally consumed or enters the spot market, and whether downstream material inventories can absorb the additional lithium salt supply. Support scenario: effective ore supply remains tight, and profits stay upstream. If Jianxiawo’s actual output is later than market expectations, if license renewals or environmental factors continue to suppress the supply elasticity of other Yichun mines, if African arrivals remain inconsistent, and if peak-season energy storage and power battery production schedules continue to exceed expectations, lithium salt producers using externally procured ore will still face the situation of “orders and capacity available, but feedstock either expensive or unstable.” In this case, negative conversion margins will force some marginal lithium salt producers to reduce operating rates. The contraction of effective lithium carbonate supply will support lithium salt prices; and once salt prices stabilize, ore prices will also gain support. The persistent margin inversion in H1 has already shown that losses are not simply bearish. They act as an automatic stabilizer for the industry chain: they force some marginal refining capacity to shut down, reduce lithium salt supply, and thereby support prices in reverse. Upside scenario: effective ore shortage transmits into lithium salt supply contraction, driving ore prices higher again. If H2 sees the combination of stronger-than-expected demand, weaker-than-expected domestic ore realization, and inconsistent overseas arrivals, lithium ore prices could still rise further. Specifically, if energy storage demand remains highly robust and power batteries enter the traditional peak season with further upward revisions to cell and material production schedules, especially as new LFP capacity continues to ramp up, monthly lithium carbonate consumption will continue to rise. At the same time, if Jianxiawo’s restart is slower than expected, or if output after the restart is mainly consumed within the integrated system with limited spot supply, and if other Jiangxi lepidolite mines are temporarily halted due to license renewal, environmental protection, safety, or profitability factors, domestic ore supply elasticity will fall short of nominal expectations. If African ore arrivals are also inconsistent due to shipment schedules, policy disruptions, grade volatility, or financing issues, lithium salt producers using externally procured ore will face difficulties replenishing feedstock. Under this scenario, ore is no longer merely a variable reverse-priced by lithium carbonate. It begins to constrain lithium salt supply in reverse. The transmission chain would be: downstream material and cell production schedules are revised upward → lithium carbonate spot destocking accelerates → lithium salt producers increase operating rates to fulfill orders → demand for processable ore rises → domestic ore and overseas arrivals fail to ramp up simultaneously → feedstock inventories at externally procured ore salt producers decline → some marginal producers cut output because they cannot secure suitable ore or because margins remain deeply negative → effective lithium carbonate supply contracts → lithium carbonate spot and futures prices strengthen again → lithium ore prices follow lithium carbonate upward. In this case, ore price increases are not driven by independent upstream strength. They are re-priced upward by lithium carbonate after insufficient effective ore supply starts to restrict lithium salt output. In this upside scenario, spot conversion margins for externally procured ore may remain negative or even widen further. On the surface, negative margins should pressure ore prices. But under the combination of strong demand, strong lithium salt prices, and tight ore supply, negative margins can instead become a price-supporting mechanism. On one hand, they force some high-cost externally procured ore producers to suspend operations, reducing lithium carbonate supply. On the other hand, producers with long-term delivery obligations, customer orders, or futures hedging needs still have to keep buying ore, further consuming saleable ore supply. The end result is that industry-chain profits remain concentrated upstream, lithium salt producers’ margin recovery is delayed, and the ore price center may move further upward. Overall, the core issue for the H2 lithium ore market is not whether there is too much or too little ore, but whether ore can be converted into lithium carbonate supply in time. The correct analytical framework should cover six variables: the strength of power battery and energy storage production schedules, inventory cycles at material and cell producers, lithium carbonate spot and futures pricing, the depth of margin inversion for lithium salt producers using externally procured ore, the actual restart and distribution path of Jianxiawo and other Yichun mines, and changes in African arrivals and traders’ saleable inventories. Lithium ore is not the starting point of the industry-chain cycle. It is the result of reverse pricing by lithium carbonate supply-demand fundamentals, refining margins, and the futures market. Only when ore starts to restrict lithium salt producers’ operating rates, or when new ore supply begins to materially increase lithium carbonate supply, will lithium ore shift from a price-following variable to a supply-demand-leading variable. SMM New Energy Analyst: Lesley Yang yangle@smm.cn +61 0451581533

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