Aluminum Slides below $3,400: U.S.-Iran Peace MoU Evaporates Geopolitical Premium

Geopolitical De-escalation: Aluminum Prices Cool from Four-Year Highs

Aluminum prices on the London Metal Exchange (LME) cooled from their early June peaks near $3,855 per tonne to trade below $3,400 on June 22, 2026. The price correction is primarily driven by the conclusion of U.S.-Iran peace negotiations in Switzerland and the signing of the peace Memorandum of Understanding (MoU) by U.S. President Donald Trump and Iranian President Masoud Pezeshkian. The planned reopening of the Strait of Hormuz has rapidly deflated the war-risk premiums that previously drove base metals to extreme highs.

However, physical supply normalization remains a gradual process. Damaged smelting infrastructure in the Middle East is estimated to take between 3 and 12 months to fully recover, meaning that physical supply constraints will remain active in the near term.

Yunnan Operations: Stable Hydroelectric Supply cushions Domestic Output

In China's Yunnan province, smelters have benefited from improved hydroelectric power availability during the wet season. Utilisation rates in the region have climbed to approximately 85%, approaching the effective ceiling of China's national capacity cap of 45 million tonnes per year. While stable Chinese output helps offset global deficits, Beijing's removal of export tax rebates continues to incentivize producers to focus on domestic high-growth sectors, particularly electric vehicles (EVs) and solar panel manufacturing, rather than exports.

LME Inventory Divergence: Falling Prices Meet Declining Warehouse Stocks

A notable feature of the current market is the divergence between falling prices and declining LME warehouse stocks. Throughout June, LME inventories have continued to trend lower, indicating that physical demand remains firm despite the macro-driven price correction. This physical tightness is further highlighted by a projected 720,000-tonne global deficit for 2026, which is expected to persist until new capacity in Indonesia and China comes online in 2027.

Technical Map: Key Support and Resistance Zones

Following the recent correction, aluminum's daily price structure presents key levels for market participants:

1. Support at $3,200: The immediate downside target is the major psychological support zone near $3,200 per tonne. Defending this level is essential to keep the long-term bullish structure intact.
2. Resistance at $3,550: To reclaim its bullish momentum, aluminum must break and hold above the key resistance level at $3,550 on a daily closing basis.

The Comdex View: Aluminum's slide below $3,400 is a technical correction to the U.S.-Iran de-escalation, but the underlying physical market remains fundamentally tight. The divergence of falling prices alongside declining LME inventories suggests that paper markets are currently ignoring physical realities. With a 720,000-tonne deficit projected for 2026 and Middle Eastern smelter damage taking months to repair, we view any consolidation near the $3,200 support zone as a premium buying opportunity before the next leg of the cycle.