Dual support from costs and production cuts; narrow stabilization in off-season EMM market [SMM EMM Weekly Review]

This week, China's EMM market rebounded slightly before moving sideways within a narrow range. Spot offers consolidated overall, while futures showed a stalemate between upward and downward movements, with the downside room for prices effectively locked in.

The cost and supply sides provided a dual bottom support, serving as the core driver for stabilizing the market. On one hand, medium and small domestic smelters continued to implement phased production cuts, steadily tightening the supply of spot cargo circulating in the market. Coupled with major producers' strong willingness to hold prices firm, spot offers were actively stabilized, effectively halting the previous price decline. On the other hand, sulphuric acid prices rose again recently, while manganese ore prices remained persistently firm. These two core raw materials simultaneously pushed up comprehensive smelting costs, leaving enterprises with an extremely low willingness to sell at a loss at low price levels, thereby providing solid cost-based support. The demand side remained constrained by the traditional consumption off-season, with no substantial recovery signals. Key downstream sectors, such as stainless steel and lithium batteries, maintained a hand-to-mouth procurement model, leading to a lack of large-scale restocking activity and a strong wait-and-see sentiment among end-users. Meanwhile, the industry's overall operating rates remained high, and social inventory was ample. The loose supply-demand pattern of oversupply did not improve substantively, and persistently weak demand continued to suppress the strength of price rebounds. In the short term, the market will struggle to break out of its sideways consolidation pattern.

In the medium and long term, upward drivers for the market are gradually accumulating. The continuous rise in sulphuric acid prices will keep squeezing smelter profits, forcing a broader scope and greater intensity of production cuts across the industry. The combination of shrinking supply and rising costs will provide dual favorable support. As the traditional peak consumption season gradually commences, downstream end-user stockpiling demand will steadily emerge, leading to a marginal improvement in the market's supply-demand pattern. At that time, EMM prices will have room and momentum for a steady rise.