Metals selloff splits market as copper holds, aluminum slumps
A macro-driven selloff in metals is erasing geopolitical premiums and fracturing the sector, leaving copper poised to outperform a weakening platinum group complex.
Base and precious metals are undergoing a sharp repricing as leveraged investors dump assets on expectations that central banks will keep interest rates higher for longer. The LMEX index plunged to a three-month low in late June after the collapse of a US-Iran ceasefire deal triggered an oil price surge and fresh inflation fears. This completely erased the index's all-time high from early June.
The selloff is fracturing the sector, creating divergent outlooks for different commodities. While structural deficits from AI-driven data center buildouts provide a long-term floor, near-term price discovery is now dictated by risk appetite, dollar strength, and China's economic health, according to Standard Chartered.
Copper remains the standout holdout. LME prices have stayed range-bound between $13,000 and $14,000 a tonne since May. Support is coming from tighter Chinese domestic supplies—evidenced by declining SHFE inventories and a 4% year-over-year jump in June imports to 478 kt—even as the country's second-quarter GDP growth of 4.3% missed its 4.5-5.0% target. The International Energy Agency warned in its latest outlook that short- and medium-term copper supply has "worsened considerably" due to sulphuric acid disruptions from the Iran conflict and sluggish mine recoveries.
Aluminum has not been as resilient. The metal hit a four-year high above $3,700 a tonne in early June as the Middle East, which accounts for 9% of global production, faced supply risks. By July 1, prices had fallen to their lowest close since February, completely erasing that geopolitical premium. Surging Asian output has capped prices, with Chinese exports of unwrought aluminum hitting an all-time high of 711kt in June, up 45% year over year. Standard Chartered lowered its 2026 price forecast to $3,318 a tonne from $3,478, though it noted the sell-off may be overdone given the slow timeline to restart more than 3 million tonnes of idled capacity.
The platinum group metals complex is facing the steepest headwinds. Palladium dropped to $1,200 an ounce in June as speculative funds increased bearish bets and exchange inventories climbed to 200 koz, approaching Nymex stockpiles of 233 koz. Standard Chartered slashed its 2026 palladium forecast to $1,454 an ounce from $1,850, citing weak demand. Rhodium is also under pressure from slowing auto sector expectations, leading the bank to cut its 2026 forecast to $9,268 an ounce.
For investors, the current environment favors selectivity over broad commodity exposure. Tariff uncertainty and inventory dislocations will continue to drive volatility, but the underlying divergence between industrial metals buoyed by the energy transition and precious metals weighed down by a weakening auto market is now firmly established.
