Recent developments indicate a de-escalation in US-Iran geopolitical tensions, fostering market optimism regarding the potential reopening of the Strait of Hormuz. Sulfur, whose price had surged due to previous transport disruptions, may gradually be shipped out, which is expected to alleviate supply constraints and price pressures. Consequently, the cost support logic for nickel prices has weakened. Over the last two consecutive trading sessions, Shanghai nickel futures have declined by more than 5%. If the Strait of Hormuz reopens, prices could face further downside risk driven by lower production costs.

From a fundamental perspective, the domestic trade price of Indonesian nickel ore remains high and stable. Adjustments to Indonesia's nickel ore benchmark price and associated taxes have increased costs, leading to stronger raw material prices. Recently, steel mills' purchase price for high-grade nickel iron has risen to 1,175 yuan per nickel unit (including tax, delivered in hold). Furthermore, maintenance shutdowns of nickel mines, triggered by issues with mining quotas, are expected to cause a month-on-month decrease of 6.5% in refined nickel production for May, projected to reach 34,700 tonnes. While supply-side reductions are gradually materializing, it is important to note that inventory pressure for primary nickel remains significant. The supply cuts may eventually lead to inventory drawdowns, potentially providing positive feedback to prices, but no clear signs of this have emerged yet. This situation is compounded by the anticipated decline in sulfur prices, which could lead to a collapse in nickel production costs. Market participants should monitor absolute price levels and watch for any potential supplementary quota announcements in July, while remaining cautious of macroeconomic disturbances.