According to the latest SMM data, the secondary lead industry faced worsening difficulties of high costs and losses, with the price spread between raw materials and finished products continuing to narrow, enterprise losses widening, and operating rates declining accordingly.

[SMM Lead Morning Meeting Minutes: Supply Recovery VS Tight Raw Materials, Lead Prices May Continue to Consolidate] The U.S.-Iran ceasefire and peace talks continued to advance, but considerable uncertainties remained, and risk-averse sentiment was strong in the market. Production at China's primary lead and secondary lead smelters was gradually recovering...

[SMM Zinc Morning Comment] Overnight, the most-traded SHFE zinc 2607 contract opened higher with a gap at 24,880 yuan/mt. At the beginning of the session, SHFE zinc briefly touched a high of 24,925 yuan/mt before pulling back to a session low of 24,735 yuan/mt. However, bears reducing open interest supported SHFE zinc to rebound in a volatile manner, recovering part of the losses. It finally closed higher at 24,780 yuan/mt, up 60 yuan/mt or 0.24%, with trading volume decreasing to 51,326 lots and open interest decreasing by 967 lots to 105,000 lots.

[SMM Morning Meeting Summary: LME Zinc Posted a Bullish Candlestick, Attention on Macro Changes] Overnight, LME zinc opened at $3,545/mt. At the beginning of the session, LME zinc moved sideways around the daily average line, edging down briefly below $3,542.5/mt before rebounding and strengthening in a volatile manner. Near the end of the session, it touched a high of $3,585/mt and ultimately closed up at $3,582.00/mt, gaining $38.5/mt or 1.09%. Trading volume increased to 125,000 lots, while open interest decreased by 212 lots to 230,000 lots.

Around May 23, 2026, import and export data for cobalt and lithium battery industry chain-related products in April were released in a concentrated manner. Data showed that China's spodumene imports in April reached 758,000 mt in physical content, down 9.5% MoM and up 21.7% YoY. Lithium carbonate imports, China imported 32,650 mt of lithium carbonate in April, up 9% MoM and up 15% YoY.......SMM compiled the import and export data for battery materials, as detailed below: Upstream Lithium Concentrates In April 2026, China's spodumene imports reached 758,000 mt in physical content, down 9.5% MoM and up 21.7% YoY, equivalent to approximately 63,000 mt of LCE. Customs data showed that April spodumene imports pulled back MoM from March, reaching 758,000 mt in physical content. By source country, Australian ore port arrivals returned to a relatively normal level, with over 350,000 mt arriving this month, up 38.9% MoM; Zimbabwe's earlier shipments arrived at port this month at 102,000 mt, down 9.2% MoM; South Africa and Nigeria saw some contraction in monthly port arrivals, while ore from Mali had almost no notable port arrivals this month due to shipping schedule impacts. Notably, spodumene powder sold by Brazil in early 2026 arrived at port this month, driving a significant increase in port arrivals from this country. Additionally, after SMM screening, the month's incoming ore was equivalent to 63,000 mt of LCE. Among the incoming ore, lithium concentrates accounted for 67%, edging down MoM, mainly because apart from Australia , ore from other source countries contained some relatively low-grade ore. Source: China Customs, compiled by SMM Spodumene concentrates (CIF China) spot pricing, according to SMM spot pricing, spodumene concentrates (CIF China) spot prices fluctuated upward in April. As of April 30, spodumene concentrates (CIF China) spot prices rose to $2,540/mt, up $221/mt from the month-end price of $2,313/mt in March, a gain of 9.81%. According to SMM, lithium carbonate prices continued to rise in April, and spodumene concentrates prices rose in tandem with salt prices, with gains exceeding those of lithium carbonate itself, causing non-integrated enterprises that purchase externally spodumene concentrates to suffer losses, with spot profitability remaining in deficit. In April, spot circulation of lepidolite concentrates relatively eased. Meanwhile, as lithium carbonate prices rose, processing fees for non-integrated enterprises also increased accordingly, preserving a certain profit margin for their processing operations and enabling these enterprises to achieve spot profitability. However, recently, spodumene concentrates prices adjusted in tandem with lithium carbonate price fluctuations, and the price center shifted downward. According to SMM's latest findings, disrupted by rumors of production resumptions at Jiangxi mines this week, lithium carbonate futures and spot prices declined, further dragging down the overall price center. Currently, lithium mines showed a weak willingness to make shipments, and transactions were mostly concentrated between traders and buyers. Port lithium ore inventory continued to decline. Going forward, attention should still be paid to the potential tight lithium ore supply triggered by high operating rates in the lithium chemicals industry. Lithium ore prices were expected to continue to hold up well. Lithium Carbonate According to customs data, China imported 32,650 mt of lithium carbonate in April, up 9% MoM and up 15% YoY. Of this, 21,000 mt was imported from Chile (65% of total imports), 9,555 mt from Argentina (29%), and 1,100 mt from Indonesia (3%). From January to April, China's cumulative lithium carbonate imports reached 116,000 mt, up 47% YoY cumulatively. In April, China exported 370 mt of lithium carbonate, down 17% MoM and down 50% YoY. From January to April, China's cumulative lithium carbonate exports totaled 1,886 mt, up 7% YoY cumulatively. In April, China imported 17,942 mt of lithium sulfate, up 9% MoM and up 296% YoY. From January to April, China's cumulative lithium sulfate imports reached 58,900 mt, up 121% YoY cumulatively. According to SMM spot quotes, spot lithium carbonate prices generally trended upward in April. As of April 30, the spot lithium carbonate price rose to 177,000 yuan/mt, up 14,000 yuan/mt from 163,000 yuan/mt on March 31, a gain of 8.59%. According to SMM analysis, China's lithium carbonate prices followed a "V-shaped" trend in April, first declining then rising, with the monthly average price up 6% MoM. In the first ten days, geopolitical disruptions in the Middle East intensified global risk-averse sentiment, causing non-ferrous metals and lithium carbonate prices to fluctuate downward. In the mid-to-late period, driven by Zimbabwe's export ban, Jiangxi mine license renewals, and rising costs, prices began to rebound and fluctuate upward, with the price center shifting notably higher by month-end. Upstream and downstream purchasing remained stagnant, with the psychological price spread widening week by week. Upstream producers held prices firm and held back from selling, maintaining high offer prices, while downstream buyers made just-in-time procurement only, with psychological price levels concentrated at 155,000-175,000 yuan/mt, restocking on dips only when prices fell rapidly. In April, spot battery-grade lithium carbonate prices dropped to around 155,500 yuan/mt in the first ten days, then rallied all the way to 177,000 yuan/mt by month-end. As of May 29, domestic spot battery-grade lithium carbonate was quoted at 174,000-181,000 yuan/mt, with an average price of 177,500 yuan/mt. Lithium Hydroxide According to customs data, in April 2026, China imported 6,689 mt of lithium hydroxide, up 9% MoM and up four times YoY. Of this, 2,252 mt were imported from South Korea, accounting for 34% of total imports; 1,706 mt came from Indonesia, accounting for approximately 25% of imports; and the remaining 40% came from Australia and Chile. In April, China exported 5,535 mt of lithium hydroxide, up 76% MoM and up 31% YoY, of which 3,915 mt were exported to South Korea and 864 mt to Japan. Continued sluggish ternary cathode material output outside China limited the absorption capacity for lithium hydroxide in markets outside China, resulting in a slight surplus in markets outside China, which in turn widened the price spread between domestic and overseas markets. Meanwhile, as suppliers outside China had previously signed long-term supply agreements with domestic traders, they were able to continuously dump lithium hydroxide into the Chinese market. Under the combined effect of these factors, the trade pattern of lithium hydroxide continued to reverse (shifting from net exports to net imports). Source: China Customs, compiled by SMM Battery Materials LiPF6 According to China Customs data, in April 2026, China's cumulative LiPF6 exports totaled approximately 868 mt, down approximately 80.9% MoM, while cumulative imports were approximately 96 mt. Export side, China's LiPF6 exports in April 2026 were approximately 868 mt, down approximately 80.9% MoM from March and down approximately 33.2% YoY. Specifically, as the LiPF6 export VAT rebate policy was officially abolished starting April 1, 2026, enterprises rushed to export in advance in March, and electrolyte enterprises outside China built up certain inventory, leading to MoM declines in China's exports to multiple major destination countries in April. Exports to Poland were 337.5 mt (down approximately 80.4% MoM), South Korea 81.804 mt (down approximately 92.56% MoM), Czech Republic 150 mt (down approximately 67.43% MoM), and the US 101.908 mt (down approximately 61.7% MoM). Only exports to Japan increased — 191.37 mt (up approximately 50.77% MoM). Artificial Graphite In April 2026, China's artificial graphite imports were 757 mt, up 12.4% MoM and down 32.9% YoY. Average import price side, in April 2026, the average import price of artificial graphite in China was 75,941 yuan/mt, up 23.1% MoM and up 14.6% YoY. In April 2026, China's artificial graphite exports totaled 45,895 mt, up 22.3% MoM but down 21% YoY. In terms of average export price, in April 2026, the average export price of China's artificial graphite was 9,214 yuan/mt, down 6.6% MoM but up 0.26% YoY. Exports from the top five exporting provinces rose 21% MoM from the previous month, with two provinces seeing export volume increases of over 35% MoM, and another province recording a 20% MoM increase. Import market, orders from downstream power battery enterprises in China gradually recovered in April. Combined with the phased tightness in spot capacity of leading anode enterprises, restocking demand was released, boosting artificial graphite imports to rebound from weakness on a MoM basis. However, import volumes remained down YoY, primarily because China's anode industry had ample overall capacity with supply still in surplus, domestic self-sufficiency continued to strengthen, and the industry's reliance on imported raw materials and finished products steadily declined. Flake Graphite In April 2026, China's flake graphite imports totaled 3,178 mt, down 19% MoM and down 45% YoY. Data source: China Customs, SMM In April 2026, China's flake graphite exports totaled 4,093 mt, down 50% MoM and down 54% YoY. Export market, the flake graphite export tax rebate policy was officially canceled this month, directly squeezing profit margins for foreign trade enterprises and significantly dampening overall export willingness. Meanwhile, the approval pace for flake graphite export licenses slowed down, hindering foreign trade shipments processes. Coupled with weak ex-China end-use demand, multiple bearish factors combined to directly drive a sharp decline in industry export volumes. The import market also continued to weaken. Goods originally intended for exports shifted to domestic sales circulation, with increasingly abundant local supply sources in China. Market enthusiasm for import procurement was insufficient, ultimately causing imports to decline in tandem this month. Phosphate Ore On May 20, 2026, according to customs data, China's phosphate ore imports totaled 207,000 mt in April 2026. April imports rose 13.5% from 182,000 mt in March. Total import value in April was $19.741 million, up 35.7% MoM from $14.552 million in March. The average unit price was $95.5/mt, up 19.6% from $79.9/mt in March. Import commentary: In May, Egypt's phosphate ore exports faced "policy tightening and weakening demand."On May 13, Egypt's Ministry of Petroleum and Mineral Resources announced that it would no longer sign any new phosphate ore export contracts. Previously, Egyptian Prime Minister Mustafa Madbouly stated clearly at a meeting on May 10 that the government was pushing for a transition from raw material exports to the manufacturing of high-value-added products such as phosphate fertiliser. Already signed long-term contracts would not be affected. This is expected to push up import prices and may affect imports. Cobalt Cobalt Hydrometallurgy Intermediate Products In April 2026, China's cobalt hydrometallurgy intermediate products imports were approximately 1,247 mt in physical content, down 26% MoM and down 98% YoY. Among them, imports from the DRC were approximately 945 mt in physical content, down 43% MoM and down 98% YoY. In April 2026, the average import price of China's cobalt hydrometallurgy intermediate products was $17,187/mt in physical content, up 2.63% MoM. It was learned that most miners had completed the Q4 2025 quota approvals, but the Q1 2026 quota approvals slowed down again due to sampling, detection and other procedural issues. In addition, transportation capacity in the DRC was tight. Fleets, driven by economic considerations, prioritised the transport of oil products and chemicals that were in production shortage, followed by other metals with shorter turnover cycles, and cobalt among non-ferrous metals came last, meaning cobalt faced significant transportation capacity issues. Constrained by the above factors, miners mainly focused on building in-transit inventory and had not yet arranged concentrated vessel bookings, and the arrival of large batches of intermediate products at ports may continue to be delayed. Unwrought Cobalt In April 2026, China's unwrought cobalt imports were approximately 1,334 mt, up 39% MoM and up 59% YoY. In April, refined cobalt imports mainly came from Indonesia, Russia, and Madagascar, with imports of 462 mt, 457 mt, and 182 mt respectively. The main reason for the increase this month was that domestic smelters lacked intermediate product raw materials and imported cobalt slabs and cobalt briquettes for re-dissolution to ensure normal production. In terms of average import prices, the average import price of China's unwrought cobalt in April 2026 was $52,724/mt, up 4.72% MoM. Cumulative imports from January to April 2026 totalled 5,916 mt, up 153% YoY cumulatively. Export side, China's unwrought cobalt exports in April 2026 were approximately 218 mt, down 47% MoM and down 95% YoY. By country, China's exports to the US dropped significantly, with April exports to the US at 35 mt, down 87.5% MoM. The main reason was that demand for alloy-grade refined cobalt in the US pulled back in April, and ex-China branded refined cobalt was already sufficient to meet regional demand, with some refined cobalt traders redirecting their destinations from the US back to China. Average export price, the average export price of China's unwrought cobalt in April 2026 was $54,590/mt, up 5.80% MoM. Cumulative exports from January to April 2026 totaled 1,792 mt, down 76% YoY.

[SMM Aluminum Express News] Rio Tinto has begun commissioning its US$1.5 billion AP60 low-carbon aluminium smelter expansion at Complexe Arvida in Quebec. The project will add 160,000 tpy of primary aluminium capacity through 96 new AP60 pots, lifting AP60 production to 220,000 tpy by the end of 2026. The expansion, together with a planned recycling centre, is expected to offset production losses from the closure of older Arvida potlines while strengthening North America’s low-carbon aluminium supply.

SMM June 1 Update: Metals market: Last Friday's overnight session saw base metals collectively decline in both domestic and overseas markets. LME copper and LME tin both led the decline with a 0.98% drop. SHFE zinc fell 0.86%, while declines in other metals were relatively small. The alumina front-month contract closed flat at 2,888 yuan/mt, and the foundry aluminum front-month contract fell 0.26%. Last Friday's overnight ferrous metals session showed mixed performance. Stainless steel fell 0.74%, and iron ore dropped 0.26%. Hot-rolled coil and rebar both rose around 0.2%. In coking coal and coke, coking coal rose 0.7% and coke rose 0.89%. Last Friday's overnight precious metals session: COMEX gold rose 0.83%, up 1.03% on the week but down 1.29% on the month, marking a third consecutive monthly decline. COMEX silver fell 0.43% overnight last Friday, down 0.81% on the week but up 2.1% on the month. In China, SHFE gold rose 1.61%, down 0.23% on the week and down 1.61% on the month, also recording a third consecutive monthly decline alongside the overseas market. SHFE silver rose 0.64% overnight last Friday, down 1.23% on the week but up 3.08% on the month. As of 8:25 AM on May 30, last Friday's overnight closing prices: Macro Front China: From January to April, total operating revenue of national state-owned and state-holding enterprises fell 0.5% YoY, while total profits rose 1.9% YoY. Specifically, total operating revenue was 26.27 trillion yuan, and total profits were 1.37 trillion yuan. Taxes payable rose 3.9% YoY to 2.12 trillion yuan. At the end of April, the asset-liability ratio of state-owned enterprises was 65.5%, up 0.4 percentage points YoY. (Xinhua News Agency) On May 29, it was reported that in Q1, China's integrated circuit exports reached $72.47 billion, up 77.5% YoY, of which memory product exports reached $45.99 billion, up 174.2% YoY. The surge in memory product exports also transmitted to supply chain service segments. The head of a logistics company said that since the beginning of this year, the company's orders related to memory exports had doubled, with large orders exceeding 100 million yuan per transaction increasing significantly. Industry insiders noted that the explosive growth in memory product exports was driven by both cyclical factors of tight global supply and demand, as well as structural industrial changes including industry chain upgrades and market share gains in China's domestic memory sector. The Deputy Secretary General of the Shenzhen Electronics Chamber of Commerce said that compared with March last year, memory prices had risen nearly tenfold, with some even seeing more than tenfold increases. The rise was mainly due to the significant price increases, which drove up the total (export) value. Domestic brand prices had a significant price spread compared with ex-China brands, making them very competitive. (CCTV Finance) [MIIT and Six Other Departments: Encouraging Equipment Manufacturing in Aerospace, Shipbuilding, Automotive, Robotics and Other Sectors] On May 29, the General Office of the Ministry of Culture and Tourism, the General Office of the Central Publicity Department, the General Office of MIIT, the General Office of the Ministry of Education, the General Office of the State-owned Assets Supervision and Administration Commission of the State Council, the General Office of the National Cultural Heritage Administration, and the General Office of the All-China Federation of Trade Unions jointly issued a notice on promoting industrial culture, protecting industrial heritage, and developing industrial tourism. The notice mentioned enriching the supply of industrial tourism products. It encouraged the active development of industrial heritage tourism, promoting the revitalization and utilization of industrial sites through creative design, new business format integration, and facade renovation, and developing new scenarios, formats, and models for industrial tourism. It vigorously promoted "factory tours," encouraging enterprises in equipment manufacturing sectors such as aerospace, shipbuilding, automotive, and robotics, consumer goods industries such as textiles and apparel, arts and crafts, and food processing, as well as e-commerce logistics, to innovatively launch programs including production process observation, simulated operations, hands-on experiences, and product customization, while ensuring production safety and confidentiality requirements, to create themed sightseeing factories. It called for the orderly expansion of smart industrial tourism, supporting the use of BeiDou, artificial intelligence, ultra-high-definition video, virtual reality, autonomous driving, and other digital technologies and equipment to create immersive and intelligent industrial tourism experiences. It supported industrial tourism venues in developing themed commerce, immersive experiences, specialty markets, and other formats to create "industrial tourism+" consumption scenarios. It encouraged localities to launch a batch of high-quality industrial tourism routes and brands with regional and industry characteristics. It encouraged industrial enterprises to strengthen product promotion, expand product sales, and build stronger enterprise brands through industrial tourism. The Shanghai International Energy Exchange announced adjustments to the daily price limit for crude oil and low-sulfur fuel oil futures contracts to 17%, the hedging position trading margin ratio to 18%, and the general position trading margin ratio to 19%; it also adjusted trading limits for related crude oil and low-sulfur fuel oil futures contracts. US dollar: As of last Friday's overnight close, the US dollar index fell 0.07% to 98.93, down 0.39% on the week but up 0.85% on the month. Optimistic expectations about the extension of the ceasefire agreement between the US and Iran weakened safe-haven demand. The US April PCE price index rose 3.8% YoY, the highest level since May 2023, in line with expectations, compared with the previous reading of 3.5%. The US April core PCE price index rose 3.3% YoY, hitting a new high since November 2023, also in line with expectations, compared with the previous reading of 3.2%. Additionally, separate data released by the Bureau of Economic Analysis showed that the US economy grew at an annualized rate of 1.6% in Q1, below the preliminary data. The initial estimate released last month showed growth of 2%. The data indicated that US consumers became more cautious amid cost-of-living pressures and uneven labor market performance. The Middle East conflict pushed up fuel and other raw material prices, with the impact transmitting through the broader economy and sending consumer confidence to record lows. Meanwhile, this inflation data is likely to further reinforce warnings from some US Fed officials that the US Fed would need to consider raising interest rates if price pressures fail to ease. Kevin Warsh, who was just sworn in as Fed Chairman on May 22, may need to convince other officials that inflation expectations can be controlled without rate hikes. (Wallstreetcn) Minneapolis Fed President Kashkari stated that it was too early to conclude that interest rates need to rise, but he believed the US Fed should keep all policy options on the table. He said it was too early to conclude that an immediate rate hike was needed. He noted the need to continue monitoring economic data and developments in the Middle East conflict before considering whether policy adjustments were necessary. Kashkari pointed out that under both the most optimistic and most pessimistic scenarios, inflation could remain significantly elevated for an extended period. He was closely monitoring this risk, as well as the possibility that inflation expectations could become unanchored. (Wallstreetcn) US Fed Vice Chair for Supervision Michelle Bowman stated that it was too early to judge the impact of the Iran conflict on inflation, and policymakers needed to look through temporary price shocks. She supported officials retaining language in their statement after last month's policy meeting that hinted at the possibility of further interest rate cuts. She said that as she thought about the future path of monetary policy, she wanted a clearer understanding of the economic impact of the Middle East conflict and the persistence of those effects. As long as credibility in the commitment to achieving the inflation target was maintained, it was appropriate to look through temporarily elevated inflation primarily driven by rising energy prices. She expected the "one-off" impact of tariffs implemented by US President Trump to fade. (Wallstreetcn) Macro front: This week, China is set to release data including China's May RatingDog Manufacturing PMI and China's May RatingDog Services PMI. The US is set to release data including the US May S&P Global Manufacturing PMI final, US May ISM Manufacturing PMI, US April construction spending MoM, US April JOLTs job openings, US May ADP employment, US May S&P Global Services PMI final, US May ISM Non-Manufacturing PMI, US April factory orders MoM, US May Challenger job cuts, US initial jobless claims for the week ending May 30, US May unemployment rate, US May seasonally adjusted non-farm payrolls, US May average hourly earnings YoY, and US May average hourly earnings MoM. The UK is set to release data including UK May Nationwide house price index MoM, UK May Manufacturing PMI final, UK April central bank mortgage approvals, UK May Services PMI final, and UK May Halifax seasonally adjusted house price index MoM. The Eurozone is set to release data including Eurozone May Manufacturing PMI final, Eurozone April unemployment rate, Eurozone May CPI YoY preliminary, Eurozone May CPI MoM preliminary, Eurozone May Services PMI final, Eurozone April PPI MoM, Eurozone April retail sales MoM, Eurozone Q1 GDP YoY revised, and Eurozone Q1 seasonally adjusted employment QoQ final. Switzerland is set to release data including Swiss April real retail sales YoY, Swiss April trade balance, Swiss May CPI MoM, and Swiss May seasonally adjusted unemployment rate. France is set to release data including France May Manufacturing PMI final, France May Services PMI final, France April industrial output MoM, and France April trade balance. Germany is set to release data including Germany May Manufacturing PMI final and Germany May Services PMI final. In addition, Australia Q1 GDP YoY and Canada May employment figures will also be released. Crude oil: As of last Friday's overnight close, oil prices in both markets fell, with WTI down 1.28% and Brent down 0.87%. On a weekly basis, oil prices suffered heavy losses, with WTI down 9.15% and Brent down 8.3%, both recording a second consecutive weekly decline and the largest weekly drop since April. WTI fell 16.47% on the month and Brent fell 16.77% on the month, with WTI posting its largest monthly decline since November 2021 and Brent its largest monthly decline since March 2020. According to Xinhua News Agency, US President Trump said on the 29th that the US and Iran had reached agreement on secondary issues beyond Iran's nuclear program and Strait of Hormuz passage, sending crude oil prices lower. The oil market in May underwent a clear three-phase evolution: Early month (May 1-6): Oil prices pulled back slightly from near four-year highs, but Brent briefly surged to around $114 after OPEC+ announced a modest production increase and shipping attacks, before plunging to the $101-106 range following signals of US-Iran de-escalation. Mid-month (May 7-20): Oil prices oscillated as ceasefire breakdowns alternated with mediation progress, with the continued blockade of the Strait of Hormuz maintaining an elevated risk premium. Month-end (May 21-29): Driven by reports of a US-Iran agreement in principle to reopen the strait, Brent briefly fell to the $93-100 low range, WTI touched $88-92, and Brent closed around $92. (Wallstreetcn) Nevertheless, analysts emphasized that until the conflict truly ends and the strait resumes normal passage, global crude oil inventories will continue to be depleted by approximately 10 to 14 million barrels per day, and physical market fundamentals remain tight. The decline in oil prices driven by ceasefire expectations reflected more the pricing of future supply recovery rather than a fundamental change in the current supply-demand pattern. (Wallstreetcn) Recent reports revealed that calculations by Goldman Sachs showed global crude oil inventories could fall below the equivalent of 100 days of global demand as early as the end of May. Goldman Sachs estimated that as of the end of April, global crude oil inventories were equivalent to approximately 101 days of global demand, and were expected to decline to 98 days by the end of May. Of this, "visible inventories" observable through satellites and other means were estimated at only 73 days of demand. Reports indicated that currently only a few vessels can pass through the Strait of Hormuz each day, resulting in a daily global crude oil supply loss exceeding 10 million barrels. (Wallstreetcn)

Overall market trading activity was sluggish. At month-end, the market maintained a steady posture, watching for the outcome of the new round of aluminum fluoride tender prices. However, as the raw material side showed signs of easing, prices are expected to be slightly under pressure next month. Going forward, close attention should continue to be paid to dynamic changes on the raw material cost side, as well as marginal adjustments in the procurement pace of downstream aluminum enterprises.

In May, the global aluminum market continued the core pattern of LME outperforming SHFE with divergent trends. The most-traded SHFE aluminum contract moved sideways in the doldrums, while LME aluminum maintained strength supported by low inventory and geopolitical premiums, with both seeing slight corrections at month-end. This month's market-driving logic revolved around Middle East ceasefire negotiations, rising expectations for US Fed interest rate hikes, divergence in inventory in and outside China, and accelerating export transmission, further highlighting the divergence between domestic and overseas aluminum price trends. The SHFE/LME aluminum price ratio declined further from the April average of 7.03 to the May average of 6.66, with the inverted price spread between domestic and overseas markets widening, as the trend of overseas aluminum prices outperforming SHFE aluminum continued to deepen. May Aluminum Price Review: Similar Pace but Intensifying Divergence in Strength China · The Most-Traded SHFE Aluminum Contract The contract opened low at around 24,800 yuan/mt at the beginning of the month. After the holiday, it pulled back rapidly due to high domestic inventory and weaker-than-expected downstream demand, hitting the monthly low of 24,075 yuan/mt on May 7. In mid-month, it rebounded to 24,620 yuan/mt driven by positive signals from the China-US meeting. In the latter part of the month, it pulled back to 24,375 yuan/mt as ceasefire expectations heated up combined with off-season drag. Ex-China · LME Aluminum The contract opened at $3,480/mt at the beginning of the month. In mid-month, it rallied to $3,680/mt (the monthly high and a four-year high) supported by supply disruptions and continued destocking. At month-end, it corrected to $3,628/mt, impacted by news that a US-Iran ceasefire agreement was 95% reached. In terms of price-driving factors, geopolitics remained the core common variable for aluminum prices in and outside China this month. Production cuts in the Middle East and shipping disruptions through the Strait of Hormuz continued to provide a shortage premium for LME aluminum. The price divergence stemmed from dual differences in macro policy and fundamentals—slow destocking from high inventory levels in China constrained SHFE aluminum's rebound space, while historically low inventory and a high premium structure outside China provided strong support for LME aluminum prices. Core Inventory Indicators: Extreme Divergence Between Domestic and Overseas Inventory with Contrasting Destocking Pace China · Gradual Decline from High Levels, Pressure Persists Social inventory began to pull back from the high of 1.456 million mt at the beginning of May, reaching approximately 1.401 million mt by month-end, with only about 55,000 mt destocked over the entire month. The destocking pace was slow, with inventory remaining at a near six-year high for the same period. SHFE warrants recorded 485,500 mt on May 29, still showing inventory buildup on a weekly basis, confirming ample spot supply in China. Ex-China · 20-Year Low, Structural Deficit Becomes Evident LME total inventory declined from approximately 363,000 mt at the beginning of the month to 338,000 mt at month-end, a decrease of approximately 25,000 mt over the month, with inventory levels at historically extreme lows. LME aluminum Cash-3M premiums closed at $92.53/mt at month-end, widening significantly from approximately $29/mt at the beginning of the month. Japan's Q3 spot premiums rose, premiums in Europe and the US continued to climb, and the rigid supply gap outside China provided sustained and strong support for LME aluminum. Macro and Fundamentals Intertwined: Geopolitical Dynamics and Rate Hike Expectations Dominating Sentiment Geopolitical Variables: Repeated Ceasefire Negotiations At the beginning of the month, the US military launched airstrikes on southern Iran, with military frictions between the two sides recurring. Shipping through the Strait of Hormuz remained disrupted, and geopolitical risk premiums climbed. At month-end, a US-Iran framework agreement was reportedly 95% complete, and a 60-day temporary ceasefire draft emerged. Expectations for the resumption of strait navigation warmed, and geopolitical premiums converged significantly. On the morning of May 28, both SHFE aluminum and LME aluminum plunged. US Fed Expectations: Hawkish Pressure US April CPI came in at 3.4% YoY, with core PCE reaching 2.8%. Inflation stickiness, compounded by Middle East conflicts pushing oil prices above $90/barrel, led hawkish US Fed officials to release signals of "raising rates at any time." Market expectations for a 25bp rate hike within the year surged abruptly, and a stronger US dollar continued to weigh on the demand outlook for non-ferrous metals. IV. Current Core Market Trades and Arbitrage Strategies (Including Divergence in Capital Behavior) Based on the current SHFE and LME fundamentals, inventory pace, and LME curve structure, the aluminum market overall exhibits a cautious unidirectional and arbitrage-dominated trading pattern. In particular, SHFE-LME cross-market reverse arbitrage (selling SHFE and buying LME) has become the core market play. Capital behavior among market participants has shown clear divergence, mainly falling into three categories: 1. Early-positioning capital (light long positions in reverse arbitrage) Some trading capital has positioned reverse arbitrage ahead of time based on the logic that China's inventory inflection point has already appeared. The core expectation of such capital is that as China's inventory gradually enters a destocking channel, accelerated destocking is highly likely to follow, rapidly easing China's high inventory pressure. The weak SHFE aluminum pattern is expected to be corrected, and the depressed SHFE-LME ratio has clear room for recovery, warranting early light positioning to capture the ratio rebound. 2. Wait-and-see cautious capital (staying on the sidelines for now) The majority of market capital has maintained a wait-and-see stance, with two core concerns: First, China is currently only experiencing slow destocking, and its sustainability is questionable during the off-season, as inventory pressure has not been substantially cleared and SHFE aluminum lacks sufficient rebound momentum. Second, LME is currently in a deep backwardation structure, making roll and extension costs for LME aluminum bulls extremely high, with significant cost erosion and high open interest pressure for holding long-term reverse arbitrage positions. Combined with the entrenched short-term pattern of LME outperforming SHFE, the price spread still risks further widening. Therefore, this segment of capital has chosen to wait for confirmed signals of accelerated destocking in China before entering the market. 3. Previously trapped capital (open interest under pressure, caught in a dilemma) Some positions that were established earlier to set up SHFE-LME reverse arbitrage are currently slightly underwater. Recently, LME has been continuously driven higher by geopolitical risks while SHFE has been range-bound and weak, with the divergence between LME outperforms SHFE intensifying, causing the ratio to remain persistently low and unrealized losses to emerge. Meanwhile, LME contango fees have risen sharply, long positions carrying costs continue to increase, and the pressure of holding trapped positions has further intensified. In the short term, these positions are caught in a dilemma, highly dependent on the subsequent pace of China's inventory destocking to restore the spread. Overall, the sole core inflection variable for SHFE-LME reverse arbitrage is currently the pace of domestic inventory destocking. Once weekly inventory drawdowns continue to widen and accelerated destocking is confirmed, it will directly drive a reversal in three types of capital behavior: sidelined capital entering the market en masse, trapped positions getting unwound, and early-entry positions realizing profits, triggering a rapid recovery in the ratio. Looking ahead to June, the aluminum market's core focus centers on three dimensions: first, whether the US-Iran ceasefire agreement can be formally signed and the pace of resuming navigation through the Strait of Hormuz, which will directly determine the extent of geopolitical premium convergence — if the agreement materializes and Middle Eastern aluminum supply gradually recovers, the prior support logic for LME aluminum faces correction risk; second, whether domestic inventory destocking can accelerate — continued export growth and import suppression will keep driving destocking, and the magnitude of destocking will determine SHFE aluminum's upside elasticity. The US Fed's June FOMC meeting is highly likely to keep rates unchanged, but a hawkish tone and sticky inflation will continue to suppress interest rate cut expectations, with a stronger US dollar maintaining sustained pressure on non-ferrous metals. Overall, the aluminum market in June is expected to continue the pattern where LME outperforms SHFE, though the degree of divergence is likely to narrow. LME aluminum is expected to hover at highs amid the tug-of-war between geopolitical premium convergence and rigid ex-China supply deficits, with downside room constrained by low inventory and high premiums. [ Data source disclaimer: Data other than publicly available information is derived from public information, market communication, and SMM's internal database models, processed by SMM for reference only and does not constitute decision-making advice. ] Data source: SMM

2025 Global Steel Mill Profitability Divergence In 2025, steel mill profitability diverged across different global regions. North American market, US-based Cleveland-Cliffs posted a net loss of $1.478 billion in 2025, with losses widening YoY; US-based Nucor reported net profit of $1.74 billion in 2025, down 13.58% YoY. South American market, Brazil's Gerdau S.A. posted net profit of $248 million in 2025, down 70.69% YoY. European market, Luxembourg-based ArcelorMittal reported net profit of $3.15 billion in 2025, up 135.4% YoY; Austria's voestalpine GROUP posted net profit of $109 million in 2025, up 178.01% YoY. Asian market, South Korea's Hyundai Steel reported net profit of approximately $680,000 in 2025, down 88.89% YoY; South Korea's POSCO Steel posted net profit of $776 million in 2025, up 26.7% YoY; China's Valin reported net profit of approximately $383 million in 2025, up 28.49% YoY. Amid Declining Steel Prices Across Multiple Global Regions, Chinese Steel Mill Profits Performed Relatively Well In 2025, steel prices declined across most global regions. Taking hot-rolled coil as an example, Black Sea export FOB prices fell 14% YoY, Turkish export FOB prices fell 11% YoY, export FOB prices from China, Japan, and India as well as EU import CFR prices fell 9% YoY, Southeast Asian import CFR prices fell 7%, while US import CFR prices rose 8%. A comparison of 2025 revenue and net profitability among selected global steelmakers revealed that among those with higher revenue (>$10 billion), Chinese steelmakers slightly outperformed their ex-China counterparts in net profit.