The sharp COMEX selloff reflects a rapid de-escalation of geopolitical risk premium. Last week's fears of a Strait of Hormuz disruption — which had driven COMEX aluminum to multi-year highs above $4,000/mt — receded after diplomatic channels confirmed no escalation in the Persian Gulf. The 4.79% single-day decline is the largest for COMEX aluminum in 2026, but prices remain 22% above their January 2026 average of $3,100/mt.
Physical market conditions remain tight despite the price retreat. LME aluminum inventories fell to 456,000 tonnes, down 39% from February 2026 and the lowest since March 2022. The cash-three months backwardation of $110/mt signals that market participants are willing to pay a substantial premium for immediate delivery — a clear indication of physical scarcity.
In Europe, duty-paid aluminum premiums (P1020) eased to $340-360/mt over LME cash, down from $420/mt during the Gulf crisis peak but still elevated by historical standards. The Rotterdam premium has been buoyed by EU anti-dumping duties on Chinese finished aluminum products, which have redirected semis trade flows and increased demand for primary metal in the region.
US Midwest delivered premiums settled at $0.28-0.30/lb over COMEX, reflecting steady industrial demand from the automotive and aerospace sectors. US aluminum shipments in May totaled 1.65 million tonnes, up 3.2% year-on-year, with transportation and construction end-use markets showing particular strength.
The Gulf crisis premium has largely unwound, but the physical market remains structurally tight with LME inventories near three-year lows. Use the current dip to secure H2 2026 volumes at sub-$3,800/mt. The backwardation structure favors prompt buying over forward deferrals. Watch for potential LME warranting activity that could add to visible inventories.