Copper prices have stumbled to six-month lows amid concerns about over-supply and nearly across-the-board declines in commodity prices, but some analysts are tipping a recovery in the red metal.
"Market sentiment towards commodities is now unduly pessimistic," analysts at Capital Economics said in a note Monday. "Having been consistently negative on over the last few years, we now expect a sustained recovery in 2015 and beyond."
It's not a consensus view, with copper becoming the favorite short trade in Macquarie's LME base metal survey.
"That's the first time in history we've had that," Colin Hamilton, global head of commodities at Macquarie, told CNBC. "It's hard to look past the mounting supply growth," he added, noting Chinese industrial buyers are cautious and it's hard for them to get credit.
Prices of copper – the industrial metal used to make everything from cars to houses – have long been seen as a temperature gauge for the global economy.
So far, copper hasn't had a great year. The reddish metal, which rallied to record highs in 2011 of over $10,000 a metric tonne amid strong demand from China during its housing boom, is trading around $6,700 a ton, down more than 9 percent so far this year.
In addition to concerns about slowing economic growth, both globally and in China in particular, and the rise in the U.S. dollar, copper has taken a hit this year from Chinese loans which used copper as collateral for financing. Not only might the loan-related demand for copper be less reliable than industrial demand, but authorities have found that the same physical metal has been used to back up multiple loans. A major crackdown on copper-based loans could seriously dampen demand for the physical metal.
But Capital Economics is relatively sanguine on the outlook for China's demand.
"We continue to expect that [copper] prices will fall back in the remainder of 2014 as mine supply, particularly from Peru, is ramped up and there is lower Chinese import demand related to financing deals," it said, but added it expects a rebound next year as official stocks are low and stronger global growth ahead will drive demand.
Copper may also get a boost from standing on the shoulders of other downtrodden commodities, the report said.
"Cheaper oil is here to stay and the prices of many agricultural commodities will remain subdued, too. But the resulting downward pressure on inflation should help the recovery in the global economy, boosting the prices of industrial metals," it said.
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Capital Economics, whose end-2015 and end-2016 forecasts are for copper to rise to $7,200 and $8,000 a metric ton, respectively, isn't alone in taking a positive view on copper.
"Despite the negativity around China's growth prospects, China's apparent consumption remains in positive territory, with export market strength a likely aid source," Morgan Stanley said in a note Monday.
Market forecasts for supply increases might also have been overly bullish, Morgan Stanley noted, citing Chinese miner MMG's announcement last week that the start of operations at its large-scale Las Bambas copper mine in Peru will be delayed until the first quarter of 2016. That news followed an announcement that a mine in Mongolia would also miss its production guidance, it noted.
"The supply/demand balance this year will post a fifth straight year of supply shortage, a plague that will also spill into next year," Morgan Stanley said. "Consensus is too bearish if current market conditions are sustained."
It expects copper prices to average $7,055 a metric ton this year and $7,175 a metric ton next year.
—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1