JAKARTA - Global nickel prices may have hit a floor, according to a Macquarie analyst who sees a market recovery driven by strong demand from the steel sector and as a surplus of ore supplies shrinks after Indonesia slowed production permits.

"Our belief is that we've seen the bottom, we've seen the supply adjustments, we see the uncertainty in future supply, and that is giving us quite a lot of support where the prices are today," Macquarie analyst Jim Lennon told a conference organised by Shanghai Metals Market in Jakarta this week.

He forecast LME cash nickel prices at $17 379 per metric ton this year, down from $21 491 per ton last year.

Cash nickel on the London Metal Exchange (LME) CMNI0 was trading at around $17 500 a ton on Thursday.

The price could rebound to $20,500 per ton in 2025 and gradually rise to $23 000 per ton in 2028, Lennon said.

Mining approvals in top producer Indonesia faced delays this year for various minerals including nickel, causing a drop in ore inventories at smelters and forcing some companies to import ore from the Philippines.

The Indonesian government approved production quotas, known as RKABs, for around 240-million metric tons of nickel ore annually for the next three years.

That fell short of the 260-million tons ore demand estimated by the Indonesian Nickel Miner Association (APNI) this year.

As of this week, only around 220-million tons of annual output has been approved this year, leading to shortages at smelters, APNI Secretary General Meidy Katrin Lengkey told the same conference.

Smelters have reduced their ore inventories "very, very dramatically", Macquarie's Lennon said.

"Hearing what we do hear about the ore supply limitations, I we think that (nickel metal oversupply this year) is now probably likely to be between 50 000 and 100 000 tons, rather than over 100 000 tons," Lennon said, referring to Macquarie's previous estimate.

Amid low prices and rising costs, nickel producers such as BHP and Anglo-American, are also slashing output, he said.

On demand, Lennon said primary nickel consumption globally is expected to grow 8.9% to 3.53-million metric tons this year, compared to the 6.3% growth in supply.

Paul White, secretary general of the International Nickel Study Group, told the conference that primary nickel demand is estimated to increase by 7.9% this year, similar to last year.

Strong stainless steel production in China and Indonesia will underpin nickel demand, Lennon and White said.

Lennon added that nickel consumption in the battery sector, which stalled last year due to high battery stockpiles, will resume its growth in 2024.

Jerome Baudelet, sales and marketing director of nickel and lithium at French miner Eramet, said demand for nickel for batteries is expected to jump to 2.7-million tons in 2035, representing 48% of global nickel demand, up from 687 000 t in 2025.