Standard for Determining the Premium of FCA Korea P1020A Imported Aluminum Ingot on SMM (Shanghai Metals Market)

Criteria for Determining the Import Premium for FCA Korea P1020A Aluminum Ingot on Shanghai Metals Market (SMM)

1. General Principles of SMM Price Assessment Methodology
Shanghai Metals Market (hereinafter referred to as SMM) is a fully independent third-party service provider that does not engage in any substantive transactions. Instead, it maintains close communication with buyers and sellers in the market as an observer or organizer, providing relevant services to the market. Through communication with industry insiders, SMM continuously formulates, reviews, and revises its methodologies, adopting the most common product specifications, trade terms, and conditions in the industry. It attaches equal importance to normal transactions that meet the specified criteria. SMM reserves the right to exclude any price data deemed unreliable or unrepresentative from its price assessments.

SMM publishes daily metal spot prices (or indices, etc.), including those for the Chinese market and markets outside China, commonly referred to as SMM prices. SMM has established corresponding methodologies for each published SMM price (all of which will be published on SMM's official website, www.smm.cn, for reference). These methodologies outline the methods and procedures for forming and publishing SMM prices, and SMM strictly adheres to these methodologies when forming and publishing its prices.

To align with the actual conditions of the spot market, SMM will make necessary revisions to its price assessment methodologies and announce them on its official website, www.smm.cn, three days prior to their official implementation, unless special circumstances, particularly force majeure (natural disasters, wars, exchange bankruptcies, etc.), necessitate a shorter notice period. For any questions or suggestions regarding SMM prices or their methodologies, please contact SMM's customer service (contact information can be found on SMM's official website, www.smm.cn).

This document outlines the criteria and management methods for determining the import premium for FCA Korea P1020A aluminum ingot. The purpose of SMM in formulating these criteria is to establish a transparent and verifiable mechanism for determining SMM prices, providing market participants with a crucial pricing indicator.

The SMM Benchmark Administration Committee also regularly reviews the methodologies and their assessment and publication processes. This committee maintains oversight of SMM's methodologies and compilation processes, ensuring that prices or indices accurately reflect the objective conditions of the physical spot market for the relevant commodities. If the committee identifies any issues, it will promptly address them and propose external consultations and revisions to the ongoing methodologies or processes, thereby enhancing the quality of the prices or indices published by SMM. The committee can only propose revisions to the methodologies and procedures to be adopted for future price or index assessments; it cannot alter prices or indices that have already been published.

2. Formation of SMM's FCA Korea P1020A Spot Premium
Background: South Korea boasts well-developed electronics, automotive, and aerospace industries, which generate substantial demand for aluminum ingots. For instance, in automotive manufacturing, aluminum ingots are used to produce engine blocks and auto body structural components, contributing to vehicle lightweighting, improved fuel economy, and enhanced performance. In the electronics industry, aluminum ingots are utilized to manufacture electronic product casings and heat sinks. However, South Korea's domestic aluminum ingot production falls short of meeting the demands of these industries, necessitating significant reliance on imports to bridge the gap. Currently, South Korea ranks as the largest importer of aluminum ingots in Asia, excluding China. SMM has introduced the FCA Korea aluminum ingot spot premium to serve as a reference for market settlement.
The FCA Korea P1020A spot premium is formed and published in accordance with this methodology, serving as an indicative price that can be utilized by both trading parties as a reference for FCA Korea P1020A spot trade settlement. This price reflects the actual or potentially executable spot transaction price range for FCA Korea P1020A spot imports at the time of publication during each full business day. It will be officially launched on May 9, 2025, with historical prices available for synchronous viewing on the SMM official website (smm.cn).
Definition: The premium for P1020A aluminum ingot transactions delivered to bonded warehouses in FCA Korea (Gwangyang, Busan, or Incheon) compared to LME 3-month plus qp swap.
Source of Raw Data Information
2.1 Price Collection from Price Submitters
2.1.1 Requirements for Smelters
a. Possess a standardized sales model, smooth sales channels, relatively stable sales volumes, a certain level of influence and reputation, operate legally and in good faith, and enjoy a positive market reputation.
b. Provide objective and truthful feedback on the actual production and sales situation of the enterprise, including production, operating rate, product quality, selling price, sales volume, sales destinations, and product inventory, and maintain good communication with SMM price analysts.
c. Demonstrate research, judgment, and expectations regarding the macroeconomic situation and spot aluminum market transactions, and maintain good communication with SMM price analysts.
2.1.1.1 Requirements for Traders
a. Engage in aluminum ingot spot import trade for over one year, with an average annual purchase and sales volume exceeding 50,000 mt on a unilateral basis, possess a standardized purchase and sales model, smooth purchase and sales channels, relatively stable purchase and sales volumes, a certain level of influence and reputation, operate legally and in good faith, and enjoy a positive market reputation.
b. Provide objective and truthful feedback on the actual aluminum procurement and sales situation of the enterprise, including product quality, purchase and sales prices, purchase and sales volumes, procurement sources and sales destinations, and product inventory, and maintain good communication with SMM price analysts.
c. Demonstrate research, judgment, and expectations regarding the macroeconomic situation, current state of the aluminum market industry, and market transactions, and maintain good communication with SMM price analysts.
Requirements for Downstream Enterprises
a. Provide objective and truthful feedback on the actual procurement situation of the enterprise, including product quality, purchase price, purchase volume, procurement sources, and inventory, and maintain good communication with SMM price analysts.
2.1.2 Method of Price Collection
SMM will, in accordance with the price submitter agreement, regularly (between 10:30 AM and 12:00 PM each trading day) collect relevant data information on FCA Korea spot prices from the price collection contacts of price submitters through methods such as phone, QQ, WeChat, fax, and email. Price data information submitted after 12:00 PM will not serve as the basis for the day's price assessment. Incomplete data lacking the required minimum information details, even if submitted before the deadline, will not be utilized. This price data information may include prices for transactions already concluded on the day, the most probable prices expected for pending transactions, offers, and counteroffers. The frequency of price collection is determined based on the trade volume and frequency of different price submitters. Prices are not collected from all contracted entities every day, but communication is maintained at least twice a week.
2.2.1 FCA Korea P1020A
The minimum standard requires an aluminum purity of at least 99.7% (with a maximum of 0.1% Si and 0.2% Fe).
2.2.2 Transaction Price/Counteroffer/Offer, etc.
Quotations may be based on the price submitter's own actual transaction, counteroffer, or offer price data, or on the transaction, counteroffer, or offer price data or market price level range of other market participants. The unit is US dollars per metric ton (mt), with no decimal places.
2.2.3 Quantity
The quantity for a single transaction is 200 mt or more.
2.2.4 Order Delivery Cycle
Within four weeks.
2.2.5 Payment Terms
Payment terms under negotiated transaction agreements, such as bank wire transfers, letters of credit, etc.
2.2.6 Delivery Location
Port delivery.
2.2.7 Payment Methods and Terms
Payment methods: LC, DP, TT, cash wire transfer, etc.; Payment terms: Payment shall be completed within two business days after the delivery of the bill of lading.
2.2.8 Pricing Unit
US dollars per metric ton (mt).
2.2.9 Form of Presentation
Presented in a range format, representing the price in US dollars excluding tax.
2.2.10 Release Time
12:00 PM each trading day (excluding Chinese public holidays and weekends).
2.3 Price Assessment Process
SMM conducts price assessment work from 11:00 AM to 12:00 PM each business day, with the specific process as follows:

2.3.1 Price Release
SMM will formulate prices in accordance with the following standards and regulations and publicly release them on its official website at www.smm.cn.
The release time is 12:00 PM on each trading day of China's legal working days.
The release time may also be affected by various emergencies and force majeure factors, such as power outages and natural disasters. In such cases, SMM will make every effort to promptly inform the market of the delayed price release time.
2.3.2 Revision of Released Prices
After the price is released, if any errors are discovered, whether due to incorrect operations or calculation errors, SMM will promptly issue a correction announcement and rectify the errors.
2.4 Methodology Changes
All markets are subject to change, and SMM is responsible for ensuring that the methodologies for market reports evolve in tandem with the market. Therefore, SMM will conduct regular internal reviews of the appropriateness of its methodologies based on industry feedback. For all potential substantive but non-urgent modifications, SMM will follow a formal external consultation process. Subsequently, significant changes will be announced with a notice period of at least 28 days, inviting industry participants to provide comments, unless special circumstances, particularly force majeure (natural disasters, wars, exchange bankruptcies, etc.), necessitate a shorter notice period.