COMEX aluminum posted its largest single-day decline in months, falling 7.79% to $3,738.25/mt. The sharp move was driven by the resolution of supply concerns from the Middle East Gulf region, where previously disrupted shipping routes have normalized. The risk premium built into prices over the prior two weeks rapidly evaporated.
LME three-month aluminum settled at $3,752.50/mt, a $102.50 contango to cash, indicating that the market expects near-term tightness to ease further. This is a notable shift from the backwardated structure seen earlier in Q2 when physical availability was constrained.
Physical aluminum premiums in the US Midwest have softened to $0.28-0.30/lb as import flows resume. European duty-paid premiums are also under pressure at $380-420/mt, down from peaks of $500+/mt in late May.
Global aluminum smelter production reached 59.3 million tonnes annualized in May, up 2.1% year-on-year, according to industry data. Chinese production contributed the bulk of the increase as Yunnan smelters resumed operations following the end of hydropower restrictions.
Demand from the construction sector remains subdued in China and Europe, partially offsetting growth from automotive and packaging segments. The global market is estimated to be in a small surplus of 200,000-300,000 tonnes in H1 2026.
The 7.79% drop creates a favorable entry point for spot purchases. With the contango suggesting further easing, buyers can delay some coverage in the near term. Monitor China capacity cap dynamics — any supply-side policy changes could reverse the move quickly.