[SMM Weekly Magnesium Review: China Magnesium Market Retreats After Rapid Rise; Foreign Trade Remains Sluggish] This week, the magnesium ingot market in the main producing areas retreated after a rapid rise. At the beginning of the week, maintenance provided support to quotations, but downstream high inventory and fear of high prices suppressed transactions. Some producers offered discounts to sell, and magnesium prices weakened under pressure. Tianjin port FOB prices followed the decline of domestic EXW prices passively. Outside China, summer break led to weak demand, and high ocean freight rates suppressed transactions. Dolomite prices remained stable, with limited cost support. Magnesium powder and magnesium alloy followed magnesium ingot by falling first and then stabilizing. Downstream steel mill desulfurization, titanium sponge, and die-casting enterprises entered the off-season, with sluggish transactions. The oversupply pattern remained unchanged. In the short term, the magnesium market is expected to continue moving sideways.

[2026 H1 Silicon Metal Market Review and Outlook: Price Fluctuation Range Narrowed Amid Cost Support and Demand Pressure] Price side: Looking back at H1 2026, affected by low capacity utilization rate of silicon metal, limited demand growth, and silicon metal already trading at relatively low levels, the spot silicon metal price fluctuation range was sharply narrowed under lower-end cost support and upper-end demand pressure. According to SMM price data, the fluctuation range of spot silicon metal prices in 2025 was 38%, while in H1 2026, it narrowed to within 5%. Futures price side, the fluctuation range of the most-traded silicon metal futures contract was 59% in 2025, narrowing to 14% in H1 2026.

[SMM Analysis: 2026 H1 Review and H2 Outlook for Secondary Aluminum Alloy: Resilience Remains, Hidden Concerns Persist] Looking ahead to H2 2026, the secondary aluminum alloy market is expected to continue operating around two main themes: "cost support" and "demand recovery," maintaining an overall pattern of high costs and tight balance.

In H1 2026, the copper rod industry experienced significant divergence amid high copper price fluctuations and limited secondary supply: periodic corrections in copper prices drove a notable YoY rise in copper cathode rod operating rates, while secondary copper output remained constrained by compliance policies, pushing industry operating rates and processing fees into a high-then-low trend. Downstream wire & cable and enamelled wire operating rates were mixed, reflecting differing demand across subsectors. Meanwhile, overseas power infrastructure and the energy transition generated substantial rigid procurement demand, and China’s copper wire rod exports surged, nearly doubling. Looking to H2, high copper prices and overcapacity are expected to persist, widening the gap between copper cathode rod and secondary copper rod. (I) Copper Price Fluctuations and Secondary Supply Shortage Lead to Significant YoY Increase in Copper Cathode Rod Operating Rate in March From the H1 copper cathode price trend, it is clear that the full-year average copper price in 2026 was significantly higher than that in the same period of 2025. Since last year, copper prices have generally drifted higher, and downstream wire and cable enterprises have gradually adapted to high raw material costs, with price acceptance continually increasing. In March this year, copper prices underwent a notable correction. Combined with the prolonged low operating rate of secondary copper rod, market demand was concentrated on copper cathode rod, leading to a concentrated release of purchasing demand that was previously suppressed by high prices. By contrast, in the same period of 2025, copper prices were in a continuous upward channel, and downstream stockpiling willingness was weak. These factors collectively drove the copper cathode rod operating rate in March up by 5.41 percentage points YoY. (II) Compliance constraints suppress secondary copper output, and copper cathode rod operating rate and processing fees rise then fall. Compliance policies for the secondary copper industry continued to be implemented, restricting the circulation of tax-included copper scrap supplies. The price difference between copper cathode and copper scrap swung wildly, and the cost advantages of secondary copper rod disappeared intermittently. Secondary copper capacity could not be fully released; only top-tier compliant enterprises maintained stable production, and operating rates remained low for an extended period. Demand shifted towards copper cathode rod, driving copper rod enterprises’ operating rates to show a high-then-low pattern. From January to March, concentrated downstream stocking by cable and wire companies and the two major power grids kept operating rates above 75%, pushing copper rod processing fees higher YoY. From April to June, copper prices surged again, curbing downstream stocking interest. Copper rod processing fees gradually pulled back from high levels, and the industry average operating rate retreated to the 60%-65% range. Many small and medium-sized processing plants faced insufficient orders and experienced periodic production cuts. (III) Copper Wire and Cable and Enamelled Wire Exhibit Phase-Based Operating Trends, With Clear Divergence in Downstream Demand In H1 2026, both the copper wire and cable and enamelled wire industries experienced an operating pattern of rapid post-Chinese New Year recovery, peaking in the high season, and then pulling back month by month. The monthly operating rate of copper wire and cable recovered from the weekly low during the Chinese New Year to a peak in April, then consolidated and stabilized in May and June, with investment at the start of the power grid’s 15th Five-Year Plan and exports providing core support, while orders from the construction and real estate sectors continued to be a drag. The monthly operating rate of enamelled wire hit its seasonal bottom after the Chinese New Year and surged to the annual high in March, but as home appliance demand weakened more than expected in Q2, the Q2 operating rate declined month by month, with the new energy, industrial motor, and export sectors acting as a floor. Both industries faced the challenges of high copper prices suppressing downstream purchase willingness and pulse-style demand releases causing frequent fluctuations in production schedule pace. (4) Multiple Positive Factors Resonate, H1 2026 Copper Wire Rod Exports Experience Explosive Growth In H1 2026, China’s copper wire rod exports continued their strong growth momentum, emerging as the most outstanding segment in the copper processing industry. In terms of export pace, the first half was characterized by a pattern of “month-on-month climb followed by stabilization at highs.” In Q1, despite the impact of the Chinese New Year holiday, exports maintained consecutive MoM growth. In Q2, driven by the concentrated release of backlog orders and sustained robust overseas demand, monthly exports continued to rise and stayed high. From January to May, China’s cumulative copper wire rod exports reached 134,000 mt, surging 97.93% YoY. Export markets were highly concentrated in Southeast Asia, the Middle East, and South Asia. Countries such as Thailand, Malaysia, Vietnam, and Saudi Arabia, with their power infrastructure upgrades, new energy project construction, and manufacturing relocation, generated rigid import demand for copper wire rod. In terms of trade structure, processing trade with imported materials was the mainstream export model, accounting for over 50%, supplemented by processing trade with supplied materials. Following adjustments to export tax rebate policies, China’s export enterprises have fully shifted to processing trade channels, with related business operating models reaching maturity. (V) High Copper Prices Alongside Overcapacity, with the Landscape of Copper Cathode Rod and Secondary Copper Rod Continuing to Diverge Looking ahead to H2 2026, the copper rod industry is expected to remain in a complex landscape of sustained high copper prices, deepening overcapacity, and continued strong export performance, with the divergence between copper cathode rod and secondary copper rod widening further. Copper cathode rod enterprises are under the dual pressures of elevated raw material costs and insufficient new orders. Prior backlog orders are gradually being delivered and fulfilled, and combined with overseas markets entering a seasonal off-season for consumption, the industry’s operating rate is likely to pull back MoM. However, the core contradiction of overcapacity persists, and overall copper rod processing fees will continue to be in the doldrums. The operating rate on the secondary copper rod side is unlikely to see a sustained uptrend, as the narrowing price difference between copper cathode rod and secondary copper rod has largely eliminated its substitution advantage, with market share continuing to concentrate toward copper cathode rod. Demand continues to shift to copper cathode rod. On the demand side, power grid, new energy, and computing power cables provide stable rigid demand, while demand from real estate and home appliances is weak, limiting overall incremental growth. On the export front, Chinese enterprises continue to develop markets in Southeast Asia and the Middle East, but overseas local capacity expansion and a high base will weigh on subsequent growth rates. Overall, the industry faces multiple contradictions, and the copper cathode rod segment must still rely on expanding both domestic and external demand channels.

1. NEVs: Domestic Sales Growth Under Pressure, Exports Surge In H1 2026, global NEV sales reached approximately 10.25 million units, a cumulative 14% YoY increase; China’s NEV sales totaled about 7.4 million units, up 7% YoY cumulatively, with an average penetration rate of around 48%. While total volume kept growing, the mix of domestic sales and exports diverged markedly. In the Chinese market, domestic sales accounted for about 69% of the total, with cumulative volume falling 14% YoY and the monthly penetration rate peaking at 62%. China’s NEV market has entered a high-base mature stage. The rush to buy ahead of the expected subsidy reduction at the end of 2025 pulled forward some demand that would have occurred in early 2026. Pushing the penetration rate beyond 60% is now encountering considerable headwinds—the remaining internal combustion engine vehicle users are mostly those with limited charging access, rigid long-distance travel needs, or high price sensitivity, making their conversion significantly harder than that of early adopters. Domestic demand is in a transitional phase shifting from policy-driven to market-driven growth. Exports, on the other hand, accounted for about 31% of China’s NEV sales in H1 2026, a sharp jump from 15% in H1 2025, with cumulative volume surging nearly 120% YoY. Three drivers fueled this export surge. First, a low base effect magnified the YoY growth: exports in H1 2025 were artificially suppressed by the EU anti-subsidy probe, creating an unusually low base. Second, automakers rushed to export ahead of tariff implementation, opening a temporary export rush window. Third, Chinese NEVs’ product competitiveness in emerging markets such as Southeast Asia and Latin America continued to improve; coupled with rising fuel vehicle operating costs outside China due to shifting international dynamics, this stimulated the release of overseas NEV demand. From a technology perspective, BEV models accounted for about 66%, basically flat from a year earlier. Beneath this “frozen” share, two opposing forces are at play. On one hand, as NEVs penetrate into lower-tier cities, inadequate charging infrastructure makes plug-in hybrid and extended-range models, which can run on both electricity and fuel, still the most practical choice. On the other hand, the popularization of 4C fast charging technology and the expansion of ultra-fast charging networks are gradually addressing the range anxiety weakness of BEVs, building momentum for a rebound in their market share. I. Vehicle Battery Capacity, from January to May the average capacity reached 68.4 kWh, up 34% YoY. The growth drivers were concentrated in three aspects: first, consumption structure upgrades, with the trade-in policy steering demand from A00/A0 to B- and C-class models—larger models carry higher-capacity batteries, and this structural effect lifted the overall average; second, the battery capacity of plug-in hybrid and extended-range models continued to expand, with all-electric driving range rising from 50–80 km to 150–250 km and corresponding battery capacity roughly doubling from 8–18 kWh to 18–40 kWh, while extended-range models grew to over 50 kWh; third, the share of commercial vehicles increased, and the vehicle battery capacity of heavy trucks and logistics vehicles generally exceeded 200 kWh, exerting a notable leverage effect on the overall average. 2. Power Battery Installations: Growth Shift, Bottoming Out in Q2 In H1 2026, China's power battery installations are estimated at around 340 GWh, up 10% YoY. Q1 was dragged by soft domestic sales and subsidy phase-out, keeping growth sluggish; Q2 saw a month-on-month recovery, with May installations reaching 71.9 GWh, a new high for the year, signaling a gradual repair in end-use demand. In the global market, H1 installations are estimated at about 580 GWh, up roughly 15% YoY, with incremental volume outside China mainly coming from the acceleration of electrification in Europe and continued ramp-up in emerging markets such as Southeast Asia and Latin America. Notably, growth outside China has outpaced the Chinese market—Q1 installations outside China reached 117.4 GWh, up 17.4% YoY, and the combined market share of Chinese enterprises in markets outside China rose to 52%. A shift in growth driver—where the Chinese market downshifts and markets outside China take over—is becoming a new feature of the industry’s growth structure. 3. Power Battery Cell Production: Strengthened LFP Dominance and Analysis of the Gap Between Production and Installations In H1 2026, China's total power battery production was about 790 GWh, with cumulative YoY growth of 43%; global power battery cell production totaled about 860 GWh, with cumulative YoY growth of 31%. In the Chinese market, LFP power battery cell share rose to 76% from 66% in the same period of 2025, with production up 64% YoY; ternary power battery cell share was around 24%, basically flat YoY. LFP’s share rose from 66% to 76%, driven by three key factors. First, the electrification ramp-up of commercial vehicles provided the most direct incremental contribution. Commercial vehicles almost entirely adopted the LFP route; heavy trucks, logistics vehicles, and buses place far higher demands on cost and safety than on energy density. The structural growth in commercial vehicle installations directly boosted LFP’s overall share. Second, the penetration rate of LFP in the passenger car segment continued to rise on its own. Extended-range and plug-in hybrid models naturally favor the LFP route, while the maturation of 4C fast-charging LFP solutions effectively addressed the range anxiety shortcoming, further squeezing the market space for mid-end ternary batteries. Third, the explosion in energy storage demand created a siphoning effect on LFP production lines. LFP production lines can flexibly switch between EV and ESS, and the high growth in energy storage orders drove LFP line operating rates significantly higher than those of ternary lines. Strengthened economies of scale further lowered costs, forming a positive feedback loop. There was a notable growth gap between power battery cell production (790 GWh, +43%) and installations (approximately 340 GWh, +10%), but this did not stem from inflated demand. Rather, it resulted from the combined effect of the following factors: First, export diversion—about 30% of production flowed to markets outside China either as complete vehicle exports or direct battery cell exports, and was not included in domestic installation statistics. Second, timing mismatch—some battery cells whose production schedules were accelerated in Q2 were still in inventory or in transit and are expected to translate into installations in H2. In addition, after the destocking cycle in H2 2025, battery cell manufacturers’ finished product inventory cycle was compressed from 2 months to 1.3 months, and there was active restocking in H1 2026. Overall, the high production growth reflected the buoyancy of battery enterprises’ production activity, while the slower installation growth was more affected by export diversion and inventory cycle disruptions. The gap between the two does not represent a substantive deterioration in the supply-demand relationship. 4. Cost Changes In H1 2026, prices of key raw materials for power battery cells rose overall. Unlike the previous cycle of soaring lithium prices, top-tier players’ cost control methods during this price rise were more diverse. As lithium carbonate futures trading matured, battery and cathode material enterprises hedged to lock in procurement costs ahead of time, effectively offsetting spot price fluctuations. Some long-term contract orders adopted formula pricing, allowing for smoother price transmission. Coupled with the ongoing large-scale centralized procurement of auxiliary materials and technological cost reductions, the increase in cost per Wh for mainstream battery cell enterprises remained generally manageable. However, as the industry was still in a price war, involution kept the overall gross margin of the industry at a relatively low level. H2 Outlook Looking ahead to H2 2026, the power battery cell industry is expected to sustain the growth momentum seen in H1, as recovering domestic demand and strong export performance reinforce each other, with the full-year trajectory trending lower in H1 and higher in H2. Sales side, the auto market is likely to stabilize in Q3, followed by the traditional peak season in Q4. Alongside the gradual absorption of the pull-forward effect from 2025, the decline in domestic sales is expected to continue narrowing. On the export front, although tariff policy uncertainty persists, the product competitiveness of Chinese NEVs in markets outside China has become entrenched. Demand in emerging markets such as Southeast Asia, Latin America, and the Middle East continues to accelerate, and proactive restocking by overseas dealers points to a high probability that strong export growth will persist in H2. Installations side, although the growth rate has come down significantly from 2025 levels, absolute incremental volume remains substantial, supported by both rising vehicle battery capacity and the ramp-up of commercial vehicle volumes. H2 installations are projected to rebound markedly from H1, and the structure—passenger vehicles providing the base and commercial vehicles contributing incremental elasticity—will remain unchanged. Notably, the inventory buffer built up from production significantly outpacing installations in H1 will gradually flow into installations in H2, offering additional support to H2 data. Overall, the power battery cell industry in 2026 has left behind the era of systemic growth dividends and officially entered a phase of deep divergence. Sustained high export growth opens new growth avenues for Chinese battery enterprises, but the decisive factor in the second half of the competition will be whether they can truly seize the window of opportunity in overseas markets and secure a firm foothold in the global supply chain.

"The heatwave has significantly driven sales growth, especially the PortaSplit air conditioner, which has sold out in some sales channels."

In May, China's magnesium product exports fell 4% MoM to 37.6kt. Magnesium ingot exports rose 13.7% MoM on auto and aluminum demand, while magnesium powder and alloy dropped 31.3% and 22.5% due to weak overseas demand. Japan's Jan-May imports surged 76.6% YoY, likely front-loaded, with downside risks in H2. Full-year exports are still expected to see modest growth despite headwinds from freight costs and maintenance shutdowns.

According to the latest customs data, China’s zinc oxide imports reached 342.78 tonnes in May, rising 53.16% month-on-month. Cumulative imports from January to May stood at 2,592.66 tonnes, up 1.7% year-on-year.China exported 1,693.81 tonnes of zinc oxide in May, a month-on-month drop of 18.71%. Total exports for the first five months hit 8,831.86 tonnes, surging 51.82% year-on-year. Breakdown of May import and export volumes is as follows:

In May, total exports of copper wire rod (HS codes 74081100 and 74081900) edged down slightly MoM, showing a YoY increase but a MoM decrease. Specific data are as follows: According to customs statistics, total exports of copper wire rod (HS codes 74081100, 74081900) in May decreased 0.47% MoM to 30,400 mt, up 79.72% YoY. Exports of copper cathode wire with maximum cross-sectional dimension greater than 6mm were 19,600 mt, up 18.09% MoM and 116.25% YoY. Monthly exports of other copper cathode wire were 10,800 mt, down 22.61% MoM but up 37.42% YoY. In May 2026, exports of copper wire rod (HS code 74081100, 74081900) stabilized. On the one hand, domestic copper rod processing enterprises continued to expand their overseas channels, with export orders providing stable support; on the other hand, copper prices fluctuated within a limited range in May, and downstream demand outside China remained stable during the period. These multiple factors combined to drive steady export performance in May. In terms of specific trade modes, in May 2026, exports under processing trade with imported materials accounted for 59.87% of total copper wire rod exports, those under processing trade with supplied materials accounted for 34.86%, entrepot trade by customs special control area accounted for 3.75%, and ordinary trade exports accounted for 1.5%. By country, the top five export destinations for China’s copper wire rod in May were Thailand, Saudi Arabia, Malaysia, Vietnam, and Indonesia, together accounting for over 70% of total exports. Among them, Thailand saw robust demand from the infrastructure, PV, and electronics manufacturing sectors, while China’s copper rod enterprises continued to deepen their presence in Southeast Asian export markets; this was further supported by stable copper prices in May, prompting some enterprises to restock and purchase in bulk. India’s exports declined significantly in May, pulling back to eighth place. In summary, China's copper rod exports stabilized overall in May 2026. Domestic processing enterprises continued to build overseas export channels, and relatively small copper price fluctuations during the month, combined with generally stable downstream demand outside China, jointly kept export volumes largely free of significant volatility. Entering June, overseas end-use demand steadied, and China's capacity to secure export orders continued to strengthen, supporting a slight MoM increase in exports. However, constrained by high-level copper price fluctuations and substitution by overseas local capacity, upside room was limited, and the overall stabilization continued.

[SMM Insights] China's Steel Export Landscape to Middle East Reshaped: Finished Products Stall while Billets Stand Out Looking back at 2025, the Middle East market was undoubtedly the most dazzling "emerging dynamic market" in China's overseas steel landscape. In 2025, China's total steel exports to the Middle East reached 15.81 million mt, with monthly shipments basically stable in the high range of 1.2–1.3 million mt. Against the backdrop of total annual steel exports of 134 million mt, up 14% YoY, the Middle East market accounted for 11%–12% of China's total overseas steel export share. This means that in a single geo-economic region, its share and strategic reliance were second only to Southeast Asia, serving as the "second largest core pillar" for China's steel going global. In terms of product mix, high-added-value HRC (29% share), steel pipes essential for oil and gas projects (18% share), and medium-thickness plates (14% share) formed the three dominant players, reflecting the region's strong diversified industrial and infrastructure throughput capacity. However, it was precisely due to such a massive trade base in 2025 and high reliance on conventional Persian Gulf shipping lanes that when geopolitical storms suddenly struck and straits were dramatically blocked, the resulting "broad market stall" and supply chain disruption were so severe. Below, we will analyze in order: the specific situation of China's steel exports to the Middle East, how cargo pressure was shifted through port replacements during the strait blockade, and how the export landscape will be reshaped after the latest US-Israel negotiations? The "Stall" and Structural Anomaly of China's Steel Exports to the Middle East Data Source: SMM, China's General Administration of Customs First, let's look at total export performance. According to SMM historical data and the latest customs export trends, China's total steel exports to the Middle East in the first four months of 2026 plummeted from 5.47 million mt in the same period of 2025 to 3.57 million mt, with April exports directly halving. Specifically, among China's 5.47 million mt of steel exports to the Middle East from January to April 2025, a highly advanced finished-product-oriented export characteristic was evident. HRC (29%), steel pipe (18%), coated steel (15%), and medium-thickness plates (14%) constituted the four mainstays of China’s steel trade. In terms of destination countries, Saudi Arabia’s rigid demand for offshore/oil & gas pipe (986,000 mt) and the UAE’s strong processing throughput of general HRC (1.607 million mt) and medium-thickness plates (779,000 mt) jointly established the traditional “dual-core consumption hinterland” within the Persian Gulf. Data source: SMM, General Administration of Customs of China Supply Shock and Physical Scissors Gap: The “Billet Export Bonanza” Under a Double Squeeze Since the start of 2026, the blockade of the Persian Gulf Strait caused by geopolitical conflicts significantly weakened overall shipments, while a dramatic “underlying mutation” simultaneously unfolded in the product mix. Steel billet, a minor product that previously accounted for only an 8% share (431,000 mt), registered a strong countertrend increase of 24% in the first four months of 2026. According to the SMM survey, the underlying driver of this anomaly originated from a localized supply shock induced by geopolitical shifts in Iran. If the closure of the Persian Gulf Strait severed the “aorta” of Middle Eastern steel imports, the sudden destruction of Iran’s two largest steel giants—Mobarakeh Steel Company (MSC) in Isfahan and Khuzestan Steel Company (KSC)—on March 27, 2026, completely ignited a “raw material upheaval” within the region. Iran is the world’s tenth-largest and the Middle East’s largest crude steel producer (accounting for over 50% of the region’s total crude steel output), with annual steel exports exceeding 10 million mt, among which semi-finished steel billets are the absolute mainstay. Mobarakeh (MSC) has an annual capacity of 11.8 million mt (20% of Iran’s total capacity), making it the undisputed “King of Flat Products/Sheets & Plates” in the Middle East; Khuzestan (KSC) is Iran’s second-largest steel producer and its most critical production base for slabs and billets. Data source: SMM, General Administration of Customs of China Under normal conditions, Iran was the primary supplier of low-priced steel billets to local rolling mills in the Middle East. With the sharp contraction in Iran's external supply, rolling mills in the Middle East, particularly in Oman and parts of the UAE outside the Gulf that were not directly affected by the blockade, faced severe raw material supply disruption risks. To maintain production, local buyers quickly released a large number of urgent inquiries to the international market. According to SMM survey, the huge demand gap for steel billets created by Iran's exit was filled and shared by supplies from China, India, and Russia. Because the local shortage was mainly crude steel raw material for rolling sheets and plates, and the equipment destruction from explosions meant that rolling lines were the first to restart, the main incremental product in these counter-trend orders was steel slab. This situation shares similarities with the article at https://mp.weixin.qq.com/s/bsrZaRRSRDHC_FmGLulJOQ (Middle East turmoil triggers "mismatch", China accelerates filling a supply vacuum of about 2.3 million mt in Southeast Asia), which mentioned that China would accelerate taking over steel billet supply gaps. That is, despite the decline in steel exports this year, billet exports also achieved counter-trend growth. Stock Game: The "X-Shaped Crossover" of Inside-Gulf Shutdowns and Outside-Gulf Safe Havens Verified by SMM through freight forwarders, steel trade (especially medium-thickness plates, pipes, and steel billets) relies heavily on bulk or breakbulk vessels. When container liners encounter blockades, they can easily reroute by amending bookings via computer systems, but the diversion of bulk carriers faces rigid constraints from destination port drafts, specialized handling equipment (such as large quay cranes), and inland truck connections. Therefore, over the past two months, the supply chain staged a dramatic "port drift" inside and outside the Persian Gulf. The following uses SMM's panoramic shipping data to explain in detail the changes in cargo flow between ports. Under normal conditions, over 70% of China's steel shipments to the Middle East converged densely on Jebel Ali Port inside the Persian Gulf and Dammam Port on the eastern coast of Saudi Arabia. But after the strait blockade, steel port arrivals at these two traditional hubs showed a historic "physical shock" in SMM's high-frequency shipping data (falling to zero from April to May). Meanwhile, the diverted cargo, fighting to survive, surged wildly toward alternative ports outside the strait, tearing open a "lifeline of safety" spatially: ① "Overload Surge" at Oman's Port of Sohar: As the most critical cross-border multimodal transshipment hub outside the Gulf, its port arrivals in April surged nearly fivefold MoM. Large batches of Chinese HRC and steel billet originally destined for the inner Gulf were forced ashore here, causing massive congestion at the port in May as cross-border heavy truck capacity collapsed. ② "Western Route Counterflow" at Saudi Arabia's Jeddah Port: Saudi Arabia abandoned its eastern sea route (Dammam Port) nationwide, forcibly redirecting all Chinese orders to Jeddah on the Red Sea side, causing its throughput to surge to a peak of 361,000 mt in April. Source: SMM, Google Maps However, it should be noted that while cargo can be transferred via other ports in the short term, port arrivals in May have already shown a weakening trend again. The reason is that alternative ports outside the Gulf simply cannot handle such massive and concentrated cargo volumes, leading to extremely severe congestion. According to SMM's survey, because navigation within the Gulf is no longer possible, some shipping lines originally bound for Jebel Ali had to divert to Fujairah, but are still queuing for berths. Jeddah Port faces similar issues. With tight capacity, prices keep surging, and transportation faces severe obstacles. Source: SMM Outlook for Change: With the US-Iran blockade-lifting deal, what impact will the shipping supply chain face? After 108 days of the "dual blockade" (Iran's blockade of the strait and the US's counter-blockade of Iranian ports) that gripped the lifeline of global energy and commodities, the US and Iran officially issued successive high-profile statements announcing a ceasefire memorandum of understanding. The relevant timeline is summarized below. Data source: Compiled by SMM from public channels The news, once released, triggered a strong market reaction. On one hand, there are expectations for export increments from shipping recovery; on the other hand, there are certain demand expectations for post-disaster reconstruction. According to the latest SMM survey, most exporters have not responded enthusiastically to the lifting of the blockade and remain skeptical about its actual implementation. Therefore, from the perspective of actual order-taking, shipments to the Middle East still need 3 to 4 weeks to be verified. If a full lifting is confirmed, the "demand backlog" caused by the earlier shipping disruptions will see a concentrated release. Based on past customs data and the local supply-demand balance table, SMM roughly predicts that finished steel products will experience strong growth expectations, potentially filling a disaster-induced gap of approximately 1.7-2.1 million mt. Among them, HRC accounts for the highest proportion (29%) of China's finished steel exports to the Middle East. Although the Middle East's largest flat steel giant, Iran's Mobarakeh Steel Company (MSC), has reported production resumptions for its blast furnace previously damaged by war, its capacity is in a post-disaster repair phase and is not expected to fill the local gap in the short term. However, recent market rumors suggest that Indian resources are seizing the Middle Eastern market at lower prices, which will also pose some impact on China's export order-taking. However, for semi-finished products, the reason Chinese steel billets have been "hot" in recent months is the supply gap caused by the strait blockade and the bombing of Iranian steel mills. Once Iran's logistics fully recover, Chinese steel billets will lose their advantage in absolute price, logistics distance, and surrounding multilateral competition, and the demand gap in Southeast Asia previously filled by substituting Iranian sources may also be reclaimed. Recently, according to SMM surveys, billet resources are already circulating in the Middle Eastern market. Through the following comparison of comprehensive landed costs (CFR) for billets in the Middle East, it can be clearly seen that Chinese resources are under comprehensive pressure: Source: SMM Therefore, steel billet exports to the Middle East are expected to be somewhat limited, with competition only possible at lower prices. Preliminary forecasts indicate a pressure reduction of 50,000–250,000 mt. However, we need to broaden our perspective to the global multilateral trade context, and we must not fall into excessive pessimism due to localized marginal reductions. Although the billets exported to the Middle East are under pressure, the incremental steel billet volumes that previously replaced Iranian exports to Southeast Asia may not necessarily be wiped out. Given the uncertainty of the Middle East situation and based on considerations of a more stable supply chain, Southeast Asian buyers may continue to source from Chinese suppliers. Therefore, against the backdrop of an overall steel recovery and resilience in steel billet prices, SMM maintains its earlier view, holding a moderately optimistic stance on annual steel exports, with expectations of "steady incremental growth." Finally, it needs to be added that, currently, due to severe port congestion, even if the strait is confirmed passable, it will still take a long time for actual cargo to arrive and cannot immediately be reflected in the data. At the same time, ocean freight rates will also maintain high-level fluctuations in the short term due to unfavorable port cargo pick-up. 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