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Benedicte Gravrand, Opalesque London:

Cedric Chone, the Geneva-based lead portfolio manager of the Galena Special Situations Fund, gives his outlook for the metals and energy sectors:

Case for investing in Metals

There are two key themes today and in coming months that support the case for metal investing: restocking and inflation.

- Restocking A normal down cycle in mining would see mines continue to produce at a loss, with banks willing to lend money to producers, secured by the minerals they have in the ground. However, due to the financial crisis, this has not happened during this cycle and as the expectation of recovery has been pushed back further, we are seeing more and more production cuts:

If you take Nickel for example: We have already lost 25% of nickel production and given the recent news of the closure of all Australian production by one of the world's largest Nickel producers, we could see production falling to 30% or perhaps even as low as 40%.

We are going to have a recovery, at some stage. Once production cycles start to pick up and demand starts to show the first signs of recovery, then we will be caught in a precarious situation.

Manufacturers have run down stocks to previously unseen levels, while producers have cut back production and pushed out or cancelled new projects. Together this sets the stage for the start of another super cycle.

We do not know when the rebound will occur......................

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