Shanghai Metals Market Price Assessment Methodology-Spot EQ Copper (bill of lading cif)

1. Guidelines to SMM price assessment methodology

Shanghai Metals Market (“SMM”) is an independent service provider that does not participate in trades. SMM is a market observer that engages buyers and sellers in the commodities market. By consulting with industry independent participants, SMM drafts the methodology, examines and revises it regularly based on the specifications and terms of trade that are generally used in the market, with equal weighting given to transactions that meet the standards. SMM reserves the right to exclude any unreliable or unrepresentative price data from its price assessment, in line with this methodology and other related Benchmark governance policies and procedures. SMM believes the processes and procedures documented in their Methodologies represent the most accurate way of representing the underlying economic reality of the markets each Benchmark seeks to measure.

SMM price assessments refer to metals spot prices or price indices of both the Chinese and overseas markets reported by SMM on a daily basis. All SMM prices are published according to a set of defined methodologies, indicating how the prices are accessed and reported. These methodologies are published on our website www.metal.com (English) or www.smm.cn (Chinese) or for all market participants to understand and refer to.

To reflect the actual trades in the spot market, SMM will update the methodology for SMM price assessments and publish all the revisions on our website www.metal.com (English) or www.smm.cn (Chinese) 28 days ahead of the changes . For queries or suggestions on the methodology, please contact SMM customer services (please find contact information on the SMM official websites). Please read this paragraph in conjunction with the SMM methodology review and changes policy, and the SMM Complaint Policy available at www.metal.com (English) or www.smm.cn (Chinese).

This document specifies the standards and management methods for the SMM spot Equivalent Quality (EQ) Copper price assessment. These standards are formulated to establish a transparent and verifiable SMM price setting mechanism and provide market participants with an important pricing indicator.

To ensure that SMM Benchmarks and indices are constructed, maintained and operated to the highest standards, the administrator of the SMM Benchmarks – Shanghai Metal Markets (“SMM” or “the Administrator”, herein known as “SMM”) employs a robust governance framework to manage and approve new Benchmarks and also approve changes to the methodologies of existing Benchmarks.

The SMM Benchmark Management Committee (“the Committee”) is responsible for all aspects of the design, management governance and calculation of the SMM Benchmarks, and is responsible for approving all policies and procedures relating to the provision of the Benchmarks. The Committee will regularly - and no less frequently than annually - review the methodology and its evaluation and publication process. Additionally, the Committee will review the methodology and all other relevant policy and procedure documents in response to changes to market conditions or any aspect of the dynam ics of the underlying market the Benchmarks seek to measure.

The Committee maintains insight of the SMM Benchmark methodology and its compilation process, ensuring that SMM prices and indices reflect as closely as possible the objective conditions of physical markets of relevant commodities. The Committee will immediately point out any problem it finds, and proposes external consultations and modifications to the existing methodologies or processes, in order to improve the quality of prices or indices published by SMM. The Committee can only propose changes to the methodologies and processes used in future Benchmark assessments, rather than modifying the already published ed prices or indices.

2. Guidelines to SMM EQ copper (bill of lading cif)

Background: China's total copper imports from the Democratic Republic of the Congo (DRC) in 2022 reached 770,000 mt, accounting for 21% of China's total copper imports, an increase of 7 percentage points from 2021. This came even as the DRC cut output in 2022 due to power shortages, hampering shipments from the country. The copper content of non-registered grade-A copper is 99.99%, which can meet the production needs of domestic enterprises. After taking into account the pound difference and unstable quality in a few cases, its price still has a certain advantage over registered copper.

In recent years, there are also available non-registered Grade-A copper under long-term contracts, which is gradually increasing. In order to better serve the market, SMM will publish spot EQ copper price (bill of lading cif) on the SMM official website from September 1, 2023, and the historical prices will also be available for reference.

Definition:

The spot EQ copper price (bill of lading cif) is an indicative price formed and published by SMM according to this methodology, which can be used by both parties of the trades as a reference for settlement of EQ copper spot trades. The price reflects the actual traded or potential tradable price range at the time of publication on each full working day, that is, the EQ copper price (bill of lading cif) .

Definition: From CIF to Shanghai, the transaction premium of non-registered and qualified (EQA grade) copper brands compared with the LME spot price.

2.1 Introduction of price assessment

SMM collects data information used to evaluate SMM EQ copper price (bill of lading cif) by means of standard acquisition (that is, the collection of raw data information that complies with the SMM Data Standards Policy), from including the bid and offer of the buyer and seller that fail to close a deal that week, and the actually traded price of spot transaction provided by the price submitters. The amount of each transaction that can be deemed as the standard offers for EQ copper or trades in the price collection will be not less than 100 mt. Data collection, assessment (calculation) and daily management of SMM EQ copper price (bill of lading cif) are conducted by SMM Operational teams (consists of 2 price analysts and a price manager).

The price published by SMM is intended to reflect the real transactable value of a commodity in a time point or period during the day. During the assessment process, we may consider other information. However, actual transactions, bids and offers will always take precedence.

Source of raw price data

Collecting from price data submitters

Criteria for smelters

Smelters shall conduct standardized transactions smoothly across channels with stable sales performance; possess operational integrity, and enjoy good reputation in the market, in the view of SMM.

Smelters should provide objective and honest feedback on their production and sales, including output, operating rate, quality of the product, sales price, sales volume, buyers and inventory, and be able to engage with SMM price analysts.

Smelters should have a sound understanding of and insight into the macro economy, spot market situation and trades of the EQ copper market, and be able to engage with SMM price analysts.

Criteria for traders

Traders should have over two years of experience in imported copper spot trading with an annual purchasing or sales volume of above 50,000 mt; conduct standardized transactions smoothly across channels with stable purchasing and sales performance; operation integrity, influence and good reputation in the market .

Traders should provide objective and honest feedback on their EQ copper procurement and sales, including quality of the product, prices and volumes for purchase and sales, sources of procurement, buyers, and inventory, and be able to engage with SMM price analysts.

Traders should have a sound understanding of and insight of the macroeconomics, status quo and trading of the EQ copper market, and be able to engage with SMM price analysts.

Criteria for downstream enterprises

Downstream enterprises should provide objective and honest feedback on their EQ copper procurement and sales, including quality of the product, prices and volumes for purchase and sales, sources of procurement, buyers, and inventory, and be able to engage with SMM price analysts.

Downstream enterprises should have a sound understanding of and insight of the macroeconomics, status quo and trading of the EQ copper market, and be able to engage with SMM price analysts.

2.1.2 Process of price data collection

In accordance with the agreement with price contributors, SMM price analysts will collect spot EQ copper prices from price submitters by means of phone, QQ, WeChat, fax, email and other forms of communication during 10:00-11:30 am China Standard Time (“CST”) each trading day. (Price data that are submitted after 11:30 am CST will not be included in price assessment on the day).

The data Will Include Traded PriceS within the Week, and the most line traded priors, bids and offers. ALL Communication Content Messengers, WeChat Me ssaging and emails as well as face-to-face communication will be recreded, while phone communication via Phone calls will also be recorded in summary and input into the database. Price data must be a typical, repeatable transaction between unaffiliated market participants (completely financially and legally independent).

EQ copper specification

EQ copper: LME non-registered Grade-A copper cathode

Transaction price/counter offer/offer, etc.

Quotation refers to the actual transaction, counter offer or offer price data of the price submitters, or the transaction, counter offer or offer price data of other market participants or the market price range. $/Mt, no decimal point.

Volume

The minimum transaction size is set at or above 100 mt .

Payment terms

The terms of payment under the negotiated transaction agreement, such as bank remittance, payment with letter of credit, etc.

2.1.2.1 Evaluation of published prices (calculation)

The price contributors include smelting enterprises, trading enterprises and downstream enterprises. The weight proportion: smelting enterprises: 25%, trading enterprises: 40%, and downstream enterprises: 35%.

• If the qualified trade data on the day exceed or stand at 3, SMM will deem that the market trading is active, and assigns weights to the standardised data according to the transaction volume.
• If the qualified trade data on the day stand at 1-2, SMM will deem that the spot market trading is relatively inactive, and assign 30% weight to the standardised transaction data, and 70% weight to the standardised valuation average.
• If there is no qualified trading data on the day, SMM will deem that there is no trade in the spot market, and assign equal weight to the standardised quotation/valuation.

2.2. 1 Price publication

The SMM spot EQ copper price (bill of lading cif) assessment is published every trading day on the SMM English and Chinese websites at www.metal.com (English) or www.smm.cn (Chinese).

The time for price collection is before 11:30 CST every trading day.

The time of the price publication may also be affected by emergencies and force majeure factors, such as power outages and natural disasters. In such cases, SMM will make every effort to inform the market of the delayed publication schedule as soon as possible. For more details, please refer to the SMM Disaster Recovery Procedures available at www.metal.com (English) or www.smm.cn (Chinese).

2.2.2 Modification of published prices

If there are any errors (mistake in calculation or errors caused by incorrect operations) after the price is published, SMM will immediately issue a correction statement to reflect the correct price.

2.2.3 Review of key points

2.2.3.1 Price (product) standard

EQ copper (Bill of lading): Conforms to the non-registered Grade-A copper cathode standard

2.2.3.2 Major EQ Copper Circulation Brands

Note: This names are no particular order. SMM spot EQ copper prices include but are not limited to the above brands.

2.3.1 Reference transaction volume

SMM sets the typical transaction size that reflects market circulation at or above 100 mt.

2.3.2. Method of delivery

Delivery in of bill of lading

2.3.3. Payment method

LC, DP, TT, cash wire transfer

2.3.4. Delivery location

Settlement completed before arriving

2.3.5 Pricing unit

$/mt

2.36 Form of SMM price

A range in US dollar, excluding tax

2.3.7 Publication time

11:30 a.m. on each trading day (China’s legal holidays and weekends excluded)

2.4 Price assessment process

SMM undertakes the spot EQ copper price assessments at 10:00-11:30 CST every working day. The detailed process is as follows:

2.5 Adjustment to the price assessment methodology

SMM updates our methodologies on a regular basis to reflect a constantly changing metals trading market. Amendments will be made based on feedback by market participants, and an internal check will be also made regularly. We will follow the external consultation workflow to amend discrepancies in the methodology that may be less time-sensitive. Major revisions and updates will be published 28 days ahead of the changes, to seek opinions from market participants, unless there are unavoidable and unpredictable circumstances such as natural disasters, war or bankruptcy of the exchange, which will shorten the period. SMM promises to carefully look into any feedback to the adjustment of the price methodologies, and will amend the methodologies under certain circumstances even if some market participants do not approve of the changes. We will arrange an off icial consultation of the spot EQ copper price assessment at least once a year. Dates of the most recent and the next session are at the start of this document.