LME aluminum continued its downward spiral on June 26, settling at $3,132 per metric tonne after touching an intraday low of $3,120. The 0.6% decline on the day adds to a brutal week that has seen aluminum lose 8.0% of its value. Since the start of June, the metal is down 17.7% — from $3,805 on June 2 to $3,132. No other LME base metal has fallen this far this fast.
The selloff has multiple drivers. China produced a record 3.65 million tonnes of primary aluminum in May, and Yunnan smelters — which had been operating at reduced capacity due to hydropower restrictions — are now running near full utilization. Chinese aluminum exports surged as domestic demand softened, flooding the Asian market with surplus metal. LME inventories have risen to roughly 550,000 tonnes, up 25,000 tonnes in the past week.
Alumina costs, which had provided a floor under aluminum prices in Q1, have collapsed. Alumina FOB Australia is now near $420 per tonne, down roughly 15% from the March peak. With alumina representing roughly 35-40% of smelting costs, the decline in alumina has lowered the marginal cost of production by approximately $150-200 per tonne. This has removed the cost support that kept aluminum above $3,500 earlier in the year.
The technical picture is deteriorating. Aluminum has broken below the 200-day moving average of roughly $3,350 with conviction. The next major support level is around $3,000 — the December 2025 low. If that breaks, aluminum could test the $2,800 area, where a significant portion of Chinese smelter capacity becomes unprofitable on a cash-cost basis.
This is the most significant buying opportunity in aluminum since late 2025. At $3,132/mt, LME aluminum is approaching levels where Chinese smelters begin to lose money on a cash-cost basis. If prices stay below $3,100 for an extended period, production cuts are likely — and aluminum has a history of sharp V-shaped recoveries when smelters reduce output. Buyers with Q3 and Q4 exposure should evaluate fixing a portion of their volumes at these levels. The risk of waiting is that production cuts trigger a rapid rebound, as happened in Q4 2025 and Q1 2026.