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

Recently, China's lead prices have continued to weaken. Secondary smelters have been broadly trapped in a dual predicament of production losses and a shortage of scrap battery raw materials. SMM's statistics on production cuts and resumption plans at secondary lead enterprises across the country in June–July clearly reflect the current pressure on the industry.

According to SMM statistics, on July 2, aluminum billet inventory in China's mainstream consumption areas dropped to 130,000 mt, down 4,000 mt from last Monday and 10,000 mt from last Thursday, with the destocking pace accelerating markedly. Compared with the same period, it was 23,500 mt lower than in 2025 and 9,700 mt lower than in 2024, pushing total inventory to the lowest level for the same period in the past three years. In terms of warehouse withdrawals,

SMM News Release, July 3 Domestic molybdenum market saw a trend of correction at the start of June, rally in mid-month and narrow high-level fluctuations at month-end, with mainstream products posting modest gains throughout the month.

[SMM Cobalt Lithium Morning Meeting Minutes: This week, overall sentiment in the industry chain recovered, as a rebound in upstream raw material prices drove some material prices higher. Lithium carbonate, LFP, and separator segments performed strongly. Downstream production schedules stayed high, with demand from energy storage, commercial vehicles, and power batteries still providing support. However, acceptance of high prices was limited, and actual transactions were mostly based on essential needs. Cobalt salts, nickel salts, and ternary cathode precursors remained in the doldrums, with a strong wait-and-see sentiment prevailing in the market. Overall, short-term prices may continue to drift higher, but attention still needs to be paid to raw material arrivals, the sustainability of restocking, and the realization of end-use demand going forward.]

While order delivery at industry leaders was relatively stable, the release of new demand was insufficient, and enterprises lacked strong motivation to hike operating rates. Going forward, the operating rate of primary aluminum alloy at industry leaders is expected to stay around current levels, likely moving sideways near 59.6% in the short term.

[SMM Lithium Battery Anode Raw Material Market Weekly Review: Graphitisation Market Temporarily Stable and Stagnant; Processing Fees Expected to Rise in the Future] June 7 news: This week, China’s graphitisation tolling prices remained stable overall, with no significant fluctuations.

[SMM Magnesium Weekly Review: Entire Magnesium Industry Chain Weakens; Supply-Demand Weakness Keeps Market Under Pressure] This week, China's magnesium industry chain was in the doldrums across the board. Dolomite prices in Wutai, Shanxi, remained flat. Regional supply tightened, but national supply was ample, and only just-in-time procurement was insufficient to drive prices higher. Fugu and Shenmu 9990 magnesium ingot mainstream prices were 15,750-15,850 yuan/mt, down 200 yuan on the week. High in-factory inventory prompted producers to sell at lower margins, while downstream buyers stayed on the sidelines, making only small restocking purchases, resulting in slow destocking. The average FOB price of magnesium ingot at Tianjin port was $2,275/mt. Overseas demand was sluggish due to the summer break, foreign buyers pushed for lower prices, and new orders were scarce. Falling raw material prices dragged down magnesium powder and magnesium alloy prices. Small and medium-sized magnesium alloy plants cut production, but earlier stockpiles were ample. Two-wheeler demand weakened, putting processing fees under pressure. Both upstream and downstream demand softened simultaneously, and cost support was insufficient. In the short term, the entire magnesium product range is expected to remain in the doldrums.

[Geopolitical Risk Premium Continues to Narrow, Aluminum Prices in the Doldrums] Progress has been made in indirect technical talks between the US and Iran, with discussions on fund repatriation and Strait security. Consultations on the nuclear issue are about to begin. The geopolitical risk premium continues to narrow. The dispute over management rights of the Strait of Hormuz persists, and uncertainty remains over the resumption of Strait navigation. The Federal Reserve's hawkish pivot boosted the US dollar index, weighing on nonferrous metal prices. Under macro headwinds, aluminum prices fell in and outside China. In the short term, bearish factors dominate, and aluminum prices are expected to stay in the doldrums.

In 2026, China's aluminum ingot inventory has continuously pulled back from a high of 1.465 million mt in early May, and by end-June cumulative destocking of 300,000 mt brought it down to 1.165 million mt, with the destocking pace steepening markedly. Last week, warehouse withdrawals surged to 170,000 mt, hitting a new single-week high in nearly four years. Driven by three factors—the supply-side proportion of liquid aluminum rising more than expected, supportive export demand, and...