There may be temporary respite for the global nickel market, Deutsche Bank said in a research note Tuesday.

Nickel is currently the worst performing base metal -- down 13.6% in the year to date -- with a significant global supply surplus and a weak demand outlook dragging on sentiment and prices.

Deutsche Bank estimates that around 35% of the industry is currently underwater with little sign of producer discipline.

"New, and lower cost Chinese nickel pig iron capacity additions have outstripped closures in China, and there have been few curtailments," the bank said.

In addition, many producers at the top end of the cost curve are in "ramp-up" mode and will want to bring costs down through achieving "full" capacity.

Producers under most of the cost pressures are also hoping for an Indonesian laterite ore ban.

"However, we expect the situation to change -- albeit temporarily -- and think the outlook is looking more positive for Q4 13 and into 2014," Deutsche Bank said.

The bank is forecasting China's near-term GDP to come in above consensus forecasts with improving macro indicators supporting a better growth outlook.

"We expect Chinese growth will stabilize in Q3 and start to accelerate from Q4 onwards as a result of mild policy support and a stronger US and Europe contributing to a recovery in export growth," the bank said.

Deutsche Bank also thinks it likely that there will be some form of action out of Indonesia in 2014 as part of a "negotiation" process to capture more rent from their laterite ores.

"A partial export ban will limit nickel pig iron expansions, as the newer type rotary kiln electric furnace capacity typically requires higher grade ore. Alternatively, an increase in export taxes will increase costs right at the "price-setting" part of the cost curve," the bank said.

However, out beyond 2014 Deutsche Bank expects supply momentum to lead to a greater surplus in the global market.

"Production momentum and our expectation of some resolution of the Indonesian ore ban in 2015 should see surpluses for the next four years unless there are some production curtailments," it said.

Deutsche Bank is forecasting nickel prices to average $15,881/mt in 2013 and $16,875/mt in 2014, before returning to average around $15,800/mt in 2015.