COMEX aluminum futures cratered 5.92% on June 22, dropping $218.50 to $3,475/mt in the largest single-session decline since March. The sell-off was driven by a weaker-than-expected ISM Manufacturing PMI flash reading for June, which signaled contraction in new orders and production — both negative for near-term aluminum demand.
The COMEX-LME spread, which had been running at $270–350/mt in recent weeks due to U.S. tariff premiums, narrowed sharply to approximately $70/mt after the sell-off. This suggests traders are repricing U.S. aluminum as a demand-challenged market rather than a tariff-protected one. U.S. Midwest physical premiums remain elevated at $418–463/mt above LME, however — the futures sell-off has not yet been reflected in the physical market, creating a dislocation.
The physical-futures divergence is worth watching closely. If U.S. manufacturing data continues to weaken into July, physical premiums should compress toward the futures-implied level, potentially saving U.S. aluminum buyers $150–250/mt on delivered metal. But if the PMI dip proves transitory, the futures market will need to reprice higher to converge with physical, and today's sell-off will look like a buying opportunity.
The COMEX-LME spread collapse is your early-warning signal. If U.S. manufacturing really is softening, physical premiums will follow the futures lower — but with a 4–6 week lag. For Q3 aluminum contracts, hold off on locking U.S. Midwest premium for July delivery. Wait 2–3 weeks to see if physical premiums start to compress. If they do, you save $150–250/mt. If the PMI dip reverses, you lock at today's elevated premium and it's still in line with Q2 levels. Net risk is asymmetric in your favor.