[SMM Rare Earth Express] The Malaysian government stated that it is evaluating adjustments to its unprocessed rare earth export policy, proposing to allow the resumption of exports of some unprocessed rare earths under conditions such as accompanying investment and technology transfer, in order to balance resource development with industrial development. Deputy Minister Syed of Malaysia’s Ministry of Natural Resources and Environmental Sustainability said that the relevant policy is still under study, and no implementation timetable has been set. Malaysia has suspended the export of unprocessed rare earths since 2024 to promote investment in the domestic rare earth processing industry. Official data shows that Malaysia has about 16.1 million mt of inferred rare earth resources, with a potential value of approximately 970 billion ringgit.

Indonesia Targets Full Implementation of Single-Gate Export System by 1 September Indonesia expects to fully implement its single-gate export policy for strategic commodities by 1 September 2026, according to President Prabowo Subianto. The policy has been under a transition phase since 1 June 2026, with PT Danantara Sumberdaya Indonesia (DSI) coordinating preparations for the nationwide rollout. "We expect the full implementation of the single-gate export policy for strategic commodities by 1 September 2026," Prabowo said. Prabowo said DSI was established to strengthen oversight of strategic commodity exports, improve transparency, and better monitor export volumes and foreign exchange earnings.The government said the framework aims to improve export governance, strengthen oversight, and curb practices such as under-invoicing and transfer pricing. During the transition period, exporters will continue operating under the existing system while DSI gradually assumes a larger coordinating role.

[SMM Cobalt-Lithium Morning Briefing: This week, prices in the new energy industry chain continued to diverge. The lithium industry chain was generally weak. The transaction center of lithium ore shifted lower alongside lithium chemical prices, and lithium carbonate fell to around 150,000 yuan/mt. Downstream firms bought the dip at low price levels, but upstream producers held prices firm and held back from selling, intensifying the market tug-of-war. Lithium hydroxide transaction prices declined in tandem, and overall trading remained sluggish. In the cobalt industry chain, demand was weak. Refined cobalt, cobalt sulphate, and cobalt chloride all lacked effective transaction support, while prices of intermediate products and Co3O4 temporarily held steady. Nickel sulphate inventory continued to decline, but downstream stockpiling willingness was insufficient, and prices still faced pressure.]

I. DRC Export Quota Policy in H1 2026: Transition from Leniency to Standardization Timeline Key Policies Jan 2026 ARECOMS allowed Q4 2025 cobalt export quotas to be extended to month-end March 2026 Mar 2026 The Ministry of Finance and the Ministry of Mines introduced controls to standardize deviations in cobalt hydroxide metal content detection Apr 2026 ARECOMS allowed Q4 2025 quotas to be extended to month-end April 2026, and Q1 2026 quotas to be extended to month-end June 2026 Jun 2026 ARECOMS revoked unused H1 2026 quotas In H1 2026, the DRC government steadily advanced the standardized operation of the cobalt export quota system. Initially, due to incomplete approval processes and standards, quota issuance efficiency was low, and the government allowed miners to extend unused quotas. As procedures matured, the government gradually shortened extension periods and officially announced the revocation of all unused H1 quotas at month-end June. The DRC government has not yet clarified the carryover rules for H2 quotas, leaving the market with two expected pathways: first, following the Q1 and Q2 approach with quarterly settlements where monthly quotas within a quarter can be flexibly transferred; second, reverting to the original 2025 quota document standards with monthly settlements that strictly prohibit inter-month carryover. This policy uncertainty remains a key supply variable for H2. II. Cobalt Product Prices: Expectations Disappointed, Consolidation and Grinding Lower Through H1 At the start of 2026, the market widely anticipated that the quota system would tighten supply, providing a basis for higher cobalt prices. The actual trend proved the opposite, with overall mt in metal content prices for cobalt products drifting lower . In January, refined cobalt surged then pulled back sharply, weighed by profit-taking, weakening macro sentiment, and broad declines in base metals, before stabilizing at relatively low levels. Other cobalt products did not drop significantly due to stronger raw material cost support but lacked upward momentum and entered a sideways state. From February to March, boosted by positive news, refined cobalt prices briefly rebounded but then re-entered a grind lower channel, pressured by overseas market arbitrage activity, sluggish end-user restocking demand, and financial constraints. Downstream enterprises maintained extremely low raw material inventory, purchasing only as needed. Divergence in the cobalt salt market intensified: upstream held prices firm on bullish expectations, with only some financially constrained enterprises selling at discounts; downstream rejected high-price purchases without order backing, resulting in sluggish transactions. Prices remained broadly steady but biased weaker. From April to May, downstream production schedules and orders continued to underperform expectations. Coupled with relatively sufficient raw material inventories at most enterprises, purchase willingness remained sluggish, with only occasional small-volume deals at low prices. On the supply side, most smelters held prices firm due to high raw material costs, but some recycling smelters and traders cut prices to sell under financial pressure, causing prices to grind lower gradually. In June, the market extended its downtrend, with the price center of all products moving lower. Refined cobalt saw weak end-use demand, while some enterprises faced pressure from mid-year financial reporting and cash collection, leading to persistent selling in spot cargo and futures markets, putting notable downward pressure on prices. Cobalt salts were impacted by weakening production schedules for downstream ternary cathode precursors and Co3O4, with procurement limited to immediate needs and aggressive price pushing, causing transaction centers to decline continuously. Cobalt intermediate products weakened slightly amid the standoff between miners’ firm pricing and sluggish purchasing by domestic smelters, with the decline milder than that of cobalt salts, further squeezing smelting margins. The core logic behind the price decline was a supply-demand mismatch : On one hand, while primary raw materials remained tight, supply from recycling increased substantially. SMM data shows that China’s recycled cobalt salt production (including in-house recycling by battery cell manufacturers) was only approximately 2,000–2,500 mt in metal content in June 2025, surging to around 4,000–4,500 mt in metal content by June 2026, effectively filling the gap in intermediate products. The share of recycling in the cobalt raw material production structure rose from approximately 13% in Q1 2025 to around 34% in Q2 2026. On the other hand, demand was sluggish. SMM estimates that LCO production in 2026 is expected to decline 22% MoM, with downstream purchasing as needed and destocking proceeding slowly. The restocking rally the market had been anticipating never materialized. Against this supply-demand mismatch, the cobalt market remained buyer-dominated over the long term, with prices weakening gradually . III. China Cobalt Product Smelting Margins: Growing Divergence, All Routes Slipping into Loss-Making Territory In H1 2026, margins across cobalt products diverged significantly after a brief spike in January 2026, with most routes subsequently falling into deep losses: Cobalt Sulphate: From late January to March, after downstream restocking ended, purchase willingness weakened and the market entered a stalemate with limited transactions. Cobalt sulphate and intermediate product prices were relatively stable, with margins only affected by exchange rate fluctuations and sentiment, consolidating within a narrow loss range. From April to June, financial pressure intensified on some smelters and traders, who sold at concessions, pushing cobalt sulphate into a grinding downtrend and further compressing production margins. By month-end June, losses for the externally purchased intermediate product route for cobalt sulphate widened to approximately 8,000 yuan/mt. Smelters, aside from executing long-term contracts, showed extremely low willingness to produce for spot orders, with some enterprises maintaining production cuts or suspensions. Refined Cobalt: From mid-January, due to factors such as profit-taking and a weakening macro environment, refined cobalt prices retreated after a rapid rise, with profit margins continuously shrinking. In February–March, despite a brief rebound, prices resumed their decline under pressure from arbitrage and demand falling short of expectations. From April, some enterprises went long on China’s refined cobalt futures, which were perceived as undervalued, leading to some recovery in spot prices, but the smelting sector remained in deep losses. In May–June, cash production costs for both the externally purchased intermediate product route and the externally purchased cobalt sulphate route stabilized in the range of 450,000–500,000 yuan/mt, while spot prices lacked upward momentum due to weak end-user demand and continued position liquidation by traders, with maximum losses approaching 100,000 yuan/mt and significant industry operating pressure. Cobalt Chloride and Co3O4: Before May, downstream acceptance of high prices was low, the market was relatively calm, prices held steady, and profits were only slightly affected by exchange rate fluctuations. In May–June, intermediate product raw material prices remained firm, but some cobalt chloride and Co3O4 enterprises, under pressure from cash flow and performance, sold at lower prices, causing profits to fall sharply. Among these, downstream demand for Co3O4 was weaker, and the price cuts were larger than those for upstream cobalt chloride, resulting in a significant narrowing of profits for the route that purchases cobalt chloride externally. IV. China’s Cobalt Resource Supply-Demand Balance: Destocking Continues but Pace Slows In H1 2026, China’s cobalt resource market remained in a destocking channel, but the destocking speed gradually slowed. Intermediate Product Imports: The DRC announced a quota export policy in mid-October 2025, but due to delays in the approval process, actual imports of intermediate products into China in H1 2026 are expected to be only about 5,000 mt in metal content (with about 2,000 mt in June). MHP Imports: In February this year, a Middle East geopolitical conflict triggered a sulphur supply crisis, delaying the commissioning of new Indonesian MHP hydrometallurgical projects and reducing output from existing projects. China’s MHP imports in H1 2026 are expected to be only about 15,000 mt in metal content. Domestic Production: Against the backdrop of raw material shortages, enterprises had a strong willingness to utilize recycled materials; China’s domestic production (including domestic ore and recycling) in H1 was about 21,000 mt in metal content. Smelting Demand: Affected by raw material shortages and losses for most products, a large number of smelters cut production or suspended operations, with cobalt smelting demand in H1 at about 65,000 mt in metal content. Overall, the H1 supply-demand gap was about 23,000 mt in metal content. The destocking trend remained intact, but the marginal intensity had weakened significantly compared to H2 2025. V. H2 Outlook: Supply recovery expectations are strong, but uncertainties remain Supply side, multiple sources of incremental growth are expected in H2: high production schedules at battery cell enterprises will generate large volumes of production waste, leaving room for further increases in recycled output; while the Strait of Hormuz crisis has not been fully resolved, sulfur transportation has slowly recovered and MHP output from Indonesia hydrometallurgy plants is expected to rebound, which will drive a corresponding increase in China’s imports; moreover, quotas accumulated in Q4 2025 and H1 2026 will gradually arrive at ports, and intermediate product imports will also slowly recover. Demand side, as raw material supply improves, cobalt salt smelters will gradually resume production, and even some idled refined cobalt smelters that have been out of operation for an extended period could be restarted. However, against a backdrop of generally weak end-use demand, the incremental demand is expected to struggle to absorb the new supply, and the market may return to an inventory buildup pattern. Two major uncertainties require close attention: Sustainability of recycled output growth: The high recycled output in H1 was largely driven by strong economics, with many smelters increasing imports of overseas black mass and drawing down domestic scrap inventories. Recently, however, cobalt salt prices across grades have fallen faster than raw material prices, eroding recycling and smelting margins. If black mass imports pull back, recycled supply could fall short of expectations. Miners holding prices firm and controlling circulation volumes: Miners currently remain strongly inclined to keep prices firm. If they restrict circulation volumes to maintain prices, actual intermediate product port arrivals into China could come in below current market expectations, thereby slowing the pace of inventory buildup or even tightening the supply-demand balance again. Overall, the tug-of-war between sellers and buyers in the cobalt market will become more complex in H2 2026. The direction of supply recovery is largely certain, but the extent and pace will be heavily disrupted by policies, geopolitics, and corporate behaviors, while any demand recovery will hinge on a tangible recovery in end-use orders . Xiao Wenhao 16621140365

In the medium to long term, the reverse-charging invoice policy will reshape the secondary copper circulation system, accelerating industry consolidation, and high-precision copper billet for new energy and AI computing power will become the core growth driver for the copper billet industry in the future.

I. Full Review of Copper Billet Industry in H1 2026 (I) Policy Side: Strict Control of Reverse Invoicing, Long-Term Restriction on Recycled Raw Material Circulation In H1, fiscal and tax supervision became the core underlying constraint weighing on the copper billet industry. The reverse invoicing policy for recycled resources entered a phase of normalized, high-pressure implementation; natural-person individual sellers had an annual invoicing quota of 5 million yuan, which significantly narrowed circulation channels for domestic unticketed scrap brass. Grassroots recyclers showed low willingness to sell, leading to a persistent shortage of compliant domestic sources of secondary brass. During the policy transition period, corporate compliance costs rose notably. Small and medium-sized processing plants, lacking channels for stable raw materials with invoices, were forced to proactively cut production and undertake maintenance to avoid risks. Large top-tier players leveraged their international trade qualifications and stable import sources to buffer the raw material gap, accelerating the concentration of industry capacity toward compliant large-scale enterprises. The No. 770 policy on secondary copper tax rebates continued to tighten, completely compressing the grey circulation space in the industry. The contradiction of raw materials "having the goods but no invoices available, with invoiced goods at high prices" pervaded the entire H1 cycle. (II) Raw Materials and Imports/Exports: Domestic Secondary Supply Contracted, Premiums on Imported Secondary Brass Rose 1. Domestic Raw Material Bottleneck Intensified The compliant circulation volume of domestic scrap brass fell sharply YoY, weakening the cost advantages of secondary brass over copper cathode. Most brass billet plants faced difficulties in raw material procurement and high credit costs, and with the natural-person quota ceiling constraint, supply could hardly return to the level seen in previous years. Meanwhile, speculation in the brass scrap market further drove up prices, and copper-zinc separation operations raised overall raw material costs. 2. Imported Cargo Became a Mainstream Supplement, but Costs Continued to Rise Domestic enterprises turned to bulk purchasing of imported secondary brass with invoices. In H1, imports of secondary brass maintained YoY growth, however, overseas scrap copper export policy uncertainties and rising international copper prices pushed up procurement premiums. Available overseas scrap brass supply tightened, and import procurement coefficients continued to climb, further raising raw material costs for brass billet. Data Source: SMM From January to May, cumulative imports of brass billet in China were approximately 11,400 mt, down 1.23% YoY, but the cumulative import value reached $105.7079 million, up 23.42% YoY, highlighting a pattern of shrinking volume and rising prices. In terms of import sources, in May, South Korea remained the largest source country (accounting for approximately 40%), with Japan second (at approximately 16%), showing initial signs of regional diversification. (III) Costs and Prices: Copper Prices Swung Wildly at Highs, Industry RC Continued to Decline In H1 2026, copper cathode prices showed a pattern of "retreating after a rapid rise and consolidating at highs." Prices hit an annual peak in January and fell to a periodic low in March. In Q2, the price center stabilized above 100,000 yuan/mt, with the annual average price rising sharply YoY, directly lifting raw material costs for copper billet. As of end-June, the average spot price of Hpb59-1 brass billet in the Zhejiang region had climbed to a historical high of 70,650 yuan/mt. Price transmission had significant blockages: traditional downstream brass demand was sluggish, with end-users possessing strong bargaining power, so raw material price increases could not be smoothly transferred downstream. The industry exhibited a typical pressured pattern of "rising prices with weak volume." From April to May, the overall profitability pressure on the industry climbed to its worst level in the past two to three years. High-precision copper billet used in new energy and AI applications saw stronger RC resilience due to technical barriers and stable rigid demand, making it the only sub-category with relatively stable profits in H1. Coupled with rising logistics, tax, and capital occupation costs, most small and medium-sized brass billet enterprises remained in a state of meager profit or even losses over the long term. (IV) Supply and Demand: Demand Severely Polarized, Operating Rates Stayed Low 1. Supply Side: Operating Rate Weakened Month by Month, Enterprise Polarization Significant The overall copper billet operating rate drifted lower in H1, continuously falling back from 50.86% in January to 46.09% in June, with declines seen both YoY and MoM. The gap in capacity polarization continued to widen: large enterprises with stable raw material channels saw a 52.6% operating rate in June; medium-sized enterprises, squeezed by both raw materials and orders, operated at only 38.76%; small processing plants, facing raw material shortages and order scarcity, saw operating rates fall to 23.44%, intensifying industry polarization. Raw material constraints were the core supply-side constraint; coupled with losses forcing enterprises to control production, the overall industry capacity utilization rate remained in a historically low range in H1. 2. Demand Side: Traditional Sectors Weakened Deeply, Emerging Sectors Strengthened Independently Traditional brass demand (air conditioning, plumbing, valves, general hardware) remained persistently weak in H1. The downturn in the post-property cycle, combined with an early off-season for home appliances, saw downstream users purchasing as needed without concentrated restocking. Meanwhile, the substitution penetration rate of stainless steel in air conditioning parts continued to rise, continuously diverting rigid demand from brass, and brass billet orders shrank month by month. Data Source: SMM Structural demand support was concentrated in the copper billet segment: the three electric systems (power battery, drive motor, and electronic control system) of NEVs, large-power charging piles, energy storage PCS, AI server GPU cooling, and precision pins for optical modules continuously released stable rigid demand. Orders for high-purity oxygen-free copper billet were full, partially offsetting the overall decline in industry demand. However, with copper billet capacity accounting for a limited share, this was not enough to boost the brass segment's recovery. II. Market Outlook for Copper Billet Industry in H2 2026 In Q3, the industry is expected to be under pressure and hit bottom. The traditional off-season, coupled with high temperatures suppressing end-user procurement and the ongoing impact of stainless steel substitution, is expected to weigh on brass demand. SMM expects the overall copper billet operating rate to continue falling to 43.65% in July, hitting an annual low. Policy-side reverse invoicing supervision is unlikely to ease, capping the compliant supply of domestic scrap brass. Combined with continuously tightening controls on overseas scrap copper exports, the pattern of high premiums on imported secondary brass is expected to persist. The raw material bottleneck is set to run through the off-season. Brass billet is anticipated to be dragged down by the triple headwinds of the off-season, substitution, and low RCs, with profitability under sustained pressure in Q3. Only the continued commissioning of NEV and AI computing infrastructure projects is likely to bring rigid demand orders for copper billet, forming the sole demand support. In Q4, prosperity is expected to recover on a QoQ basis. As home appliances and plumbing enter their traditional stockpiling peak season, brass billet orders are expected to rebound MoM. Combined with year-end push for annual targets in PV, energy storage, and NEVs, demand for copper billet is expected to further strengthen, with industry operating rates and transactions both recovering. However, copper cathode prices are highly likely to continue consolidating at highs, with the raw material cost center stay high, putting cost pressure on processing enterprises throughout the year. In the medium and long term, the traditional brass demand center is expected to decline year by year, while AI computing, new energy, and energy storage constitute the core growth drivers of the copper billet industry. Small and medium-sized outdated capacity is expected to continuously exit the market, while top-tier players are simultaneously laying out high-end copper billet capacity. The three major thresholds of raw materials, orders, and compliance continue to widen the gap between enterprises, making the industry's transformation towards scale, compliance, and high-end manufacturing an irreversible trend. In summary: In H1 2026, the core contradictions in the copper billet industry were supply shortages caused by tightening recycled raw material policies, weakening traditional end-use demand, and the squeezing of processing profits by high copper prices. The industry relied on new energy and AI copper billet for structural support, maintaining a generally weak operating environment. In H2, the market is expected to show a pattern of initial weakness followed by later strength: in Q3, the triple negative resonance of the off-season, raw materials, and substitution is expected to keep operating rates and profitability under sustained pressure; in Q4, the combination of the traditional end-user peak season and continuously increasing volumes from emerging sectors is expected to repair industry prosperity on a QoQ basis. In the medium and long term, the reverse invoicing policy is reshaping the secondary copper circulation system, accelerating market clearing. High-precision copper billet for new energy and AI computing infrastructure is expected to become the core future growth line for the copper billet industry.

[2026 Copper Plate/Sheet and Strip Semiannual Review and Outlook: H1 Operating Rate Hits a Five-Year High for the Same Period, Emerging Sectors Underpin Industry Resilience] In H1 2026, after experiencing wild swings in copper prices at the start of the year and the seasonal shutdown during the Chinese New Year, China's copper plate/sheet and strip industry entered a rapid recovery path from March onward, presenting an overall...

South Africa's global chrome ore exports eased marginally in May 2026 to 2.43 million mt, down 1.82% month-on-month from 2.47 million mt in April, but still 43.08% higher than a year earlier. High-carbon ferrochrome (HC FeCr) exports moved in the opposite direction, rising 5.66% MoM to 123,795 mt, though volumes remained 48.76% below May 2025.

The essence of this supply crunch is a "three-layered squeeze": Layer 1: Physical cutoff – the Hormuz blockade severed Middle Eastern supply, halting nearly half of global seaborne trade. Layer 2: Policy lockdown – overlapping export bans from Russia, Kazakhstan, and Turkey blocked alternative supply sources, further tightening global tradable volumes. Layer 3: Capacity and inventory collapse – war-damaged Middle Eastern production facilities are slow to restart.

China's Sulphuric Acid Market Regional Divergence Intensifies, Index Continues to Strengthen [SMM Sulphuric Acid Weekly Review]