It feels like a bad dream that didn't really happen.

At last year's Prospectors and Developers Association of Canada conference, the mining industry was in shambles. Commodity prices had collapsed, project financing was nonexistent, and some blue-chip miners such as Teck Resources Ltd. were fighting for survival.

The market crash had happened only a few months before, but the dominant view among economists was that the world was moving into a multi-year depression.

For the mining industry, it lasted only about two more weeks.

Prompted by aggressive commodity hoarding by China, prices were rebounding by the end of March. And within a few weeks, equity financing opened up and the sector was back on its feet.

Today, prices are sky-high, financing is much more available, and Teck's stock price has shot up by more than 1,100%.

Like a bad dream that didn't really happen.

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Except that it did happen, and there is no shortage of experts who think it could happen again. But at least next time the industry will be ready. The 2008 meltdown was a good learning experience for miners that over-extended themselves when times were good. Next time the market crashes, they swear up and down that they are equipped to survive it.

But in the past several months, a new consensus has developed in the industry: that the crash of 2008 was not the end of the world, but a mere blip in a long-term bull-market in commodities that will run for years to come.

"It was a cyclical correction in a secular recovery of commodities that began in 2002," says Stephen Walker, head of global mining research at RBC Capital Markets.

It is a period in which commodities went from being a near-fringe investment to a core part of investors' portfolios. As long as the middle classes of emerging countries continue to grow and consume them, few experts think the trend will change.

The rally in prices shows no signs of slowing. Asia has started accepting large increases in bulk commodity prices. Despite some hiccups, base metals are improving along with global industrial production. And precious metals are becoming the only currency that anyone trusts.

Don Coxe, the famed market strategist with BMO Capital Markets, was one of the first to predict commodities were heading into an historic bull market eight years ago. He was also one of the last to predict such a strong recovery, having not guessed how well China would withstand the recession in the West.

"It was a truly heroic assumption to say that they would manage to do it on this scale given that their exports were falling off," he says.

But done it they have - the Chinese economy is poised to grow more than 10% this year after growing at an 8.2% clip last year.

Through it all, China has defied the critics who said the government's massive urbanization plan to support its exploding middle class could never come to fruition.

"This is a policy on a scale never seen in human history, yet they are making it work," Mr. Coxe says.

On the supply side, experts say the market still looks constrained. Existing mines are depleting, head grades are lower, and significant new discoveries are few and far between.

For the companies that actually have good projects and have secured financing, permitting has become more difficult than ever. It takes longer and longer to get environmental approval to build anything, and anti-mining groups have become more sophisticated and adept at stopping projects in their tracks, even in politically friendly jurisdictions. Teck is facing one such challenge in Alaska that threatens the future of its Red Dog mine.

The new sources of supply that are coming on are often in high-risk countries, and miners are running into many unforeseen (though not surprising) problems. Nowhere is that more apparent than the Democratic Republic of the Congo, where the government stole away First Quantum Minerals Ltd.'s Kolwezi copper project in very dubious fashion.

Put together, experts say that the commodity bull market can run for many more years, even if demand remains lacklustre in the West.

But that doesn't mean the metals have not gotten ahead of themselves.

There is an overwhelming view that traders, hedge funds and other speculators have driven metal prices well above the levels suggested by fundamental demand. One example that many people point to is copper, where prices have jumped nearly 200% from last year's lows even though inventories on the London Metals Exchange are at a five-year high.

In a sign of just how much speculation is out there, Goldman Sachs and J.P. Morgan recently took advantage of the high inventories to jump into the metal warehousing business.

Aaron Fennell, senior market strategist at Lind Waldock, says traders are trying to get into commodities early in anticipation of a recovery in the United States. That is reflected in prices.

"They're being sort of pre-emptive in their approach. A good trader always has to join the party before the crowd gets there, not when the crowd gets there," he says.

And though the excess speculation is undeniable, analysts do not seem all that worried about it.

"It creates potential for some pretty serious volatility. While volatility can create money-making opportunities, it can also shake out a lot of players that shouldn't be in the market," Mr. Walker says.

While the bull market is back, it is still fragile. Interest rates will have to go up eventually, and that is never a good thing for metal markets. Inventories are a risk, and demand from the Western World is still poor.

But the biggest concern remains China.

Much of the commodity demand from China in the past year was a direct result of its US$586-billion government stimulus package, and there are questions about whether demand will hold up when the effects of that spending wear off.

Metals have also been a beneficiary of the extremely loose lending practices of Chinese banks, which led to excessive speculation in housing, commodities, and almost everything else. Chinese lending is now being tightened.

So no one denies the risks. But given the choice, Mr. Coxe is still going to bet on China and commodities.

"Since I proclaimed the biggest commodity boom of all-time back in 2002, there has never been a four-month period when someone hasn't sent me a detailed letter predicting China is about to collapse," he says.

"I have come up with a new rule that says the time to sell commodity stocks is when we can go through three to four months in which no authoritative study predicts the collapse of China."

pkoven@nationalpost.com