1. General rules of SMM price methodology

Shanghai Color Network (hereinafter referred to as SMM) is a completely independent third-party service organization, does not participate in any substantive transactions, but as a market observer or organizer to maintain close communication with the buyer or seller of the transaction, and provide relevant services to the market. SMM continuously develops, reviews and modifies its methodology by communicating with people in the industry to adopt the most common product specifications, terms of trade and terms of trade in the industry. And pay equal attention to normal transactions that meet the specifications and standards. SMM reserves the right to exclude any price information deemed to be unreliable or unrepresentative from its quotation judgment.

SMM publishes spot metal prices (or price indices, including the Chinese market, non-Chinese markets and global markets) on a daily basis, commonly referred to as SMM prices. SMM has formulated the corresponding methodology for the published SMM price (all of which will be published on SMM's official website www.smm.cn for inquiry). The methodology specifies the methods and procedures for generating and publishing SMM prices, and produces and publishes SMM prices in strict accordance with the provisions of the methodology.

In order to conform to the actual situation of the spot market, SMM will make the necessary amendments to the SMM price methodology and announce it on the official SMM website www.smm.cn before it is officially implemented. If you have any questions or suggestions about SMM price and its methodology, please contact SMM customer service personnel (please contact www.smm.cn on the official SMM website).

This document sets out the standard for the quotation of SMM import zinc premium. The purpose of SMM is to establish a transparent and verifiable SMM price setting mechanism.

2. Significance of quotation for SMM0# Import Zinc Premium

With the development of the market, in the zinc industry chain, there is more than 10% of the imported zinc demand in the domestic market every year, which complements the domestic supply gap. In the context of import inflow demand, in order to meet the needs of our customers to understand the market price in a timely manner, after a period of market research, SMM will officially issue an import zinc premium quotation from July 1, 2019. SMM import zinc premium quotation is an indicative price generated and issued by SMM according to this methodology and can be used by both sides of the transaction as a reference basis for spot import trade settlement. At that time, SMM price members can query the historical price synchronously.

3. SMM import 0 # zinc premium quotation methodology

According to the IOSCO (International Organization of Securities Commission) process, SMM continuously formulates, reviews and modifies its valuation methods through communication with people in the industry.

3.1. SMM definition of import zinc premium

Import zinc premium (warehouse receipt): in the Shanghai Free Trade Zone, LME registered a trading premium over the spot price of LME for the benchmark brand of 0 # refined zinc.

Import zinc premium (bill of lading): CIF to Shanghai, LME registered 0 # refined zinc benchmark brand actual goods to LME spot price trading premium.

Among them, the free trade agreement between China, South Korea and Australia has officially entered into force since December 20, 2015. since January 1, 2016, 0# refined zinc, which originated in South Korea and Australia, has been exempted from import duties of 1 per cent. Therefore, the quotation transaction in the foreign trade market includes both duty-free brand and non-duty-free brand 0 # imported zinc, and SMM does not split it when quoting.

3.2. Criteria for evaluating the premium of imported zinc in SMM

3.2.1. Price range

The SMM import 0 # zinc premium reflects the spot price range of US $0 # zinc that actually occurs at the time of price announcement.

3.2.2. Announcement time

SMM prices are written on the day of release. The price is announced at 11:30 on each trading day. After the price is announced, SMM will not revise or adjust the price according to the market information collected after the price is published.

3. 3. Based on the actual transaction or tradable price

3.3.1 Collection of transaction prices by core market participants

The important source of SMM import 0 # zinc premium quotation is the transaction price collection of core market participants.

The SMM import 0 # zinc premium is based on data collected from real market transactions prior to the release of prices on each trading day morning. Standards are collected from relatively fixed market participants, including smelters, traders and end users. In judging the data collected, SMM will integrate the situation of each transaction, including the relationship between the two sides of the transaction, the brand of the traded products, specifications and quality, and payment terms, etc., in order to determine the price range.

Prices arising from affiliated transactions, selling under financial or legal pressure, and any other non-repeatable transactions will be excluded. SMM0# imports zinc premium is not the trading volume weighted average price. However, SMM will consider the quantity of each transaction to determine the price according to the uniform standard.

Shanghai Nonferrous Network price pickers collect trading data from a list of active traders in a relatively fixed spot market. SMM continuously assesses the performance of each company and the accuracy of the information it has provided in the past to determine whether to exclude or add a company from the price unit.

3.4. Standardization of data

3.4.1 maximum price: the highest value of the verified transaction price is taken as the highest price; in the absence of a verified transaction price, the lowest selling price collected is the highest price.

Lowest price: take the lowest value of the verified transaction price as the lowest price; in the absence of verified transaction price, take the highest value of the collected selling price as the lowest price.

3.4.2 SMM evaluates prices on the basis of the following principles:

3.4.3 in special cases where market transactions are lacking and difficult to value, market analysts may standardize transaction information outside the scope of the standard specifications applicable to the methodology (including, but not limited to, the time of performance of the transaction, delivery, payment terms, goods specifications and other operational items). The standardization process adopted needs to be consistent with standard practices and used only as a reference or part of the valuation. If standardization operations are used in standardized or published valuations, they shall be described in the main body of the report and the standardization process shall be described and reasonably explained.

3.4.4 although SMM has a standardized definition of our price, there is a diversity of transactions in the market. The price of each transaction is affected by many factors, including the size of the order, the brand of the goods, the time of delivery, the terms of payment, etc. If there is only one offer, or if the quotation difference is too large to establish the transaction value, SMM will also make a judgment. SMM will take into account quotations, bids and transaction information on the market and align them with our standards.

3.5. Exclusion of data

SMM price assessment is based on a large amount of market information, and SMM reserves the right to exclude any price information that is considered to be unreliable or unrepresentative from its analysis report.

3.5.1 in accordance with the evaluation criteria, SMM analysts should actively identify abnormal market information and remove it from the evaluation process.

As far as market valuation is concerned, analysts collect information on a daily basis and confirm market transaction information through multiple sources.

3.5.2 at the time of valuation, SMM takes into account only normal transactions between non-affiliated parties.

3.5.3 when SMM analysts have good reason to suspect that a transaction does not represent typical market behavior, SMM will also exclude the transaction from the evaluation transaction. For example, a transaction that ignores the best offer or offer in the market; when there is evidence that a market person has disclosed only part of his market behavior to SMM; or when the transaction price is outside the mainstream scope of typical market trading.

3.5.4 SMM records examples of abnormal data and periodically reviews them to determine whether specific patterns exist.

4. Definition of transactions and products

4.1. Quantity

SMM defines a typical transaction volume that reflects market circulation as each transaction that is not in this category, and we will refer to the feedback of market participants and deduct premiums or discounts to make it meet the standard, or if the transaction is an accidental act that cannot be repeated under the same conditions, it may not be taken into account.

4.2. Currency and unit of valuation

The price is in US dollars per ton.

5. Price release and historical data

SMM 0 # Import Zinc Premium is posted in Chinese and English on the official website of Shanghai Nonferrous Network at 11:30 every trading day. Shanghai Nonferrous Network's market report also has price data.