Recasts to focus on aluminium's fall; updates prices by Asian market close

June 16 (Reuters) - Aluminium extended its fall to hit a more than two-month low on Tuesday, as traders unwound the geopolitical risk premium built into prices after a preliminary U.S.-Iran agreement eased concerns over Middle East supply disruptions.

Three-month aluminium on the London Metal Exchange CMAL3 declined 0.95% to $3,347.50 a metric ton as of 0748 GMT, after it pulled back to the lowest since March 27 at $3,334 earlier today.

And the most-active aluminium contract on the Shanghai Futures Exchange SAFcv1 tumbled 1.65% to close daytime trading at 23,830 yuan ($3,525.77) a ton, after hitting the lowest since March 24 at 23,725 yuan earlier this session.

U.S. President Donald Trump said on Monday the U.S. and Iran had signed a preliminary agreement to end their war and reopen the Strait of Hormuz, though details remained unclear and a permanent truce is still to be negotiated.

The reopening of the Strait of Hormuz is lifting hopes for more aluminium exported from the Persian Gulf region through the key waterway, easing near-term supply worries.

Sucden Financial analysts said the market "aggressively priced out a portion of the geopolitical risk premium".

Sucden analysts added that the move pointed to a broader reassessment of supply risks and investor positioning, rather than just intraday profit-taking.

The cash to three-month spread of LME aluminium CMAL0-3 has flipped into a contango.

Meanwhile, China's output of aluminium remained strong in May, up 1.7% to 3.89 million tons. In the first five months of the year, the country produced 19.22 million tons, rising 3.5% from the corresponding period last year, helping ease near-term supply worries.

However, hitting sentiment was China's retail sales, which contracted for the first time in over three years, shrinking 0.6% in May, and fixed-asset investment fell 4.1% in the first five months of the year, worse than expectations of a 2% drop.

Elsewhere on the LME, copper CMCU3 declined 0.72%, zinc CMZN3 lost 0.96%, lead CMPB3 dipped 0.20%, nickel CMNI3 dropped 0.40% and tin CMSN3 shed 0.61%.

Among other base metals on SHFE, copper SCFcv1 dropped 0.71%, zinc SZncv1 gained 0.16%, lead SPBcv1 rose 0.90%, nickel SNIcv1 added 0.40%, and tin SSNcv1 climbed 0.96%.

($1 = 6.7588 Chinese yuan)