The metal has plummeted more than 15% so far in June as the interim US-Iran peace deal spurred optimism over a resumption of Middle Eastern shipments as the Strait of Hormuz opens up. That wiped out gains made over the previous three months due to the loss of supply from the region that accounts for nearly a 10th of global output.

Record exports from China and daring voyages through the strait to replenish alumina reserves have also helped fuel aluminum's swift reversal of its earlier rally. The market has flipped into a contango structure, where prompt prices are cheaper than for later-dated contracts, over the last couple of weeks, signaling concerns over a shortage have eased.

"Ex-China premiums dropped rapidly following the news of truce deals, signaling supplies are not that tight any more," said Peng Dinggui, an analyst at Zhongtai Futures Co. "The rapid plunge in aluminum prices caught many investors off guard. It is causing a bit panic in the market. Some Chinese investors expect prices to drop further."

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Along with other metals, aluminum has also been hit by a sharp run-up in the US dollar since mid-May, making it more expensive for many buyers. Expectations the Federal Reserve will need to keep interest rates higher for longer, or possibly raise them, to curb inflation have also weighed on the demand outlook.

Aluminum rose 0.5% to $3,103 a ton on the London Metal Exchange as of 12:24 p.m. in Shanghai, and is down 15.4% for the month, most since October 2008. Copper advanced 0.4% to $13,332 a ton, and is 2.2% lower in June. Iron ore dipped 0.1% to $98.75 a ton in Singapore.

Zinc climbed 0.2% to $3,482 a ton, as a report from state-backed researcher Beijing Antaike Information Co. that China's major smelters planned to cut their use of zinc concentrate this year by 600,000 to 1 million tons to reduce losses.

The potential reduction of refined zinc output is not enough to overturn the domestic surplus for this year, said Liu Xiaoyi, an analyst with Zijin Tianfeng Futures Co. It will translate into a drop of about 200,000 to 300,000 tons of refined zinc output, or as much as 4% of total Chinese production last year, she said.