The global nickel market could swing to a surprise deficit this year if growth in Indonesian output is constrained by slow mining permit approvals, according to Macquarie Group Ltd.

While the bank’s base case is for a surplus of less than 40 000 t, that may be in jeopardy if Jakarta’s approvals are slow and full-year growth in local production dips below 13%, analysts including Jim Lennon said in a note. “This is a major change from our recent forecasts,” they wrote.

Benchmark nickel prices collapsed by 45% last year driven by massive growth in supply from the Southeast Asian nation, which outstripped faltering demand from the stainless steel and battery industries. Still, permit approvals in Indonesia this year — without which producers may not operate — have been tardy, prompting the government to pledge that they’ll be cleared this month.

Outside Indonesia, stockpiles built up within China last year may also have been smaller than previously estimated given a bigger-than-projected increase in its consumption, the analysts said, citing field research. As a result, the market appears to be closer to balance than previously assessed, they said.

Nickel ore in Indonesia has been trading at a more-than-$7 a ton premium to the government-set minimum selling price, Macquarie said. That would add about $700 a ton to production costs in the country, the bank estimates.

That would present significant relief to miners and smelters elsewhere, with many weighing shutdowns as Indonesia’s massive low-cost production makes them uncompetitive. Septian Hario Seto, the government official who has overseen the country’s nickel-processing boom, said prices are unlikely to rise much above $18 000 a ton on the London Metal Exchange.

Three-month nickel futures were last at $17 810 a ton on the LME after climbing 10% last month amid the Indonesian permitting delays. That’s made the metal the best year-to-date performer among the main six.