1. Report Industry Investment Rating No relevant content provided. 2. Core Viewpoints of the Report - The Carbon Border Adjustment Mechanism (CBAM) officially came into effect on January 1, 2026. Although the tariff is levied on importers by the EU, it will be passed on to exporting companies, impacting China's steel and aluminum product exports [2][5][76][77]. - High default values for determining embedded emissions in goods will weaken the export competitiveness of China's steel and aluminum products. The default carbon intensity values for most China steel and aluminum products are significantly higher than the CBAM benchmark values, leading to an increase in carbon tariffs [3][6]. - From the perspective of total exports, the impact of CBAM on the steel and aluminum industries in China is not yet significant. However, for specific enterprises with a large proportion of exports to the EU, the formal implementation of CBAM will lead to a significant increase in carbon tariff costs. Enterprises need to optimize carbon emission management and use financial instruments to hedge risks [4][6]. 3. Summary According to the Table of Contents 3.1 CBAM will be implemented on January 1, 2026 - **Historical Evolution of CBAM**: CBAM is part of the "Fit for 55" package announced by the EU in 2021. In 2023, the EU passed legislation for CBAM and initiated the transition period from October 1, 2023, to December 31, 2025. In 2025, the EU revised CBAM, including setting an import volume exemption threshold, revising deadlines, reducing the number of certificates required, and planning to publish annual default carbon prices starting from 2027 [12][13][14]. - **Impact on China's Steel and Aluminum Exports to the EU**: China's exports of CBAM products to the EU rank fifth in volume but first in implicit carbon emissions. The carbon emission costs will be passed on to Chinese export enterprises, impacting the export of steel and aluminum products [22][24]. 3.2 High default values will weaken the export competitiveness of China's steel and aluminum products - **Core of CBAM**: The core of CBAM is to define carbon intensity values. The EU proposes two methods: using actual carbon emission intensity (which needs third - party verification) and using default values published by the EU (which will result in higher carbon tariffs) [32][33][34]. - **China's Higher Default Value of Carbon Intensity**: The EU has set significantly higher default carbon emission intensity values for Chinese products than the CBAM benchmark values, with annual stepwise increases. China's steel and aluminum products exported to the EU face higher default carbon emission intensities in 2026 [39][40]. - **Underestimated Carbon Emission Cost**: The carbon emission costs paid for Chinese export products may have been underestimated. The EU may set a default carbon price for China significantly lower than the domestic carbon emission allowance price [41]. 3.3 The cost of exporting steel and aluminum products from China to the EU will rise sharply - **Carbon Tariff on Steel Products**: Chinese steel product exports to the EU face higher default carbon emission intensity values. If the carbon costs already paid by Chinese companies are not considered and the default values are used, Chinese steel products will face a carbon tariff ranging from CNY389 - CNY3,917 per tonne [42][46]. - **Carbon Tariff on Aluminum Products**: Default carbon intensities for Chinese aluminium products significantly exceed CBAM benchmarks. If the default values are used, Chinese aluminum and aluminum products will face a carbon tariff of CNY1399 - CNY3413 per tonne [53][57]. 3.4 Addressing the Challenges Posed by CBAM for Steel and Aluminum Exporters - **Limited Impact on Total Exports**: The implementation of CBAM has a relatively limited impact on China's total steel and aluminum exports. However, it has a more significant impact on the cost of Chinese steel and aluminum companies exporting to the EU [65][66]. - **Conduct CBAM Carbon Verification**: Some steel and aluminum enterprises in China have actual carbon emission intensities lower than the default values set by the EU. Companies should actively use actual carbon emission data and avoid using default values [67][68][69]. - **Reasonable Use of EUA Futures Hedging**: In the second half of 2025, EU carbon allowance prices rose significantly. The EUA supply and demand have been tight in the long term, which may drive carbon prices upward. Exporting companies can hedge through the EUA futures market to avoid the risk of rising carbon tariff costs [70][73].

Summary of the Conference Call for Yongjin Co., Ltd. Industry and Company Overview - **Company**: Yongjin Co., Ltd. - **Industry**: Steel manufacturing, specifically focusing on stainless steel production and processing in Vietnam Key Points and Arguments Investment Plans - Yongjin plans to invest in a phased manner to establish a steelmaking and hot-rolling industry chain in Vietnam, starting with a 500,000-ton hot-rolling production line to mitigate trade barriers and future supply chain risks [2][4] - The project will utilize overseas cash flow for funding, avoiding domestic ODI processes due to the project's cost exceeding $300 million, which requires approval from the National Development and Reform Commission [5] Environmental Considerations - The project will adopt a short-process steelmaking method, which is expected to lower carbon emissions and help address potential future carbon tariffs [6] - Research is needed on the availability of scrap steel in Vietnam and surrounding countries to ensure sufficient raw material supply [6] Financial Projections - The expected annual return on investment for the project is approximately 14%, with a per-ton investment cost of about 1,300 RMB and a projected net profit of around 200 RMB per ton once fully operational [9] - In 2024, the net profit for cold-rolled processing in Vietnam is expected to exceed 800 RMB per ton, but in 2025, profits may be significantly compressed due to anti-dumping measures from South Korea, potentially reducing gross profit to only a few hundred RMB per ton [10] Market Dynamics - China is the largest market for scrap stainless steel, but the recycling system in Europe and the U.S. is more mature. Future export controls from China and Indonesia may limit raw material sources for Vietnam [12] - Yongjin aims to gradually enhance self-sufficiency through the short-process steelmaking project, initially meeting its own needs and then expanding to neighboring countries [12] Competitive Landscape - Yongjin does not foresee direct competition with Qingshan Group due to the long investment cycle and potential for future collaboration through equity partnerships [13] Price and Demand Trends - The recent increase in nickel prices has not led to a significant rise in downstream orders, as customers are cautious about inventory accumulation ahead of the Chinese New Year [14][17] - The company employs a price-locking model to mitigate risks from price fluctuations, which has limited the impact on operations [15] Inventory Management - Inventory levels across factories are stable, with only a few thousand tons on hand, preventing significant operational impacts from inventory fluctuations [15] Future Outlook - Yongjin is confident in maintaining stable domestic operations and anticipates that overseas business will face challenges in 2026, but not worse than in 2025. The target for production is set at approximately 3.8 million tons, an increase from 3.6 million tons in 2025 [18] Aerospace Sector Involvement - Yongjin has been tracking the stainless steel supply chain for the aerospace sector but has not yet established formal partnerships due to sensitivities related to foreign ownership [19] Additional Important Information - The project will be implemented in stages, with initial tasks focused on obtaining investment permits and preparing land for construction [5] - The company is aware of potential tariffs in the European and American markets and is taking measures to address these issues, including initiating anti-dumping investigations and planning to supply the EU market through Turkey [7][8]

Core Viewpoint - The company emphasizes its commitment to minimizing carbon emissions in its aluminum production processes, particularly in its Indonesian project, which primarily relies on thermal power with some integration of photovoltaic energy sources [1] Group 1: Company Strategy - The Indonesian project of the company mainly utilizes thermal power, supplemented by some photovoltaic energy [1] - The company aims to combine the stability of traditional energy sources with the low-carbon advantages of renewable energy to achieve minimal carbon emissions [1] Group 2: Industry Context - The company is responding to investor inquiries regarding its competitive position against peers, specifically in relation to carbon emission regulations and energy sourcing [1]