Metal markets can withstand a recession in the U.S. and prices, which have been "savaged" in a massive sell off the past few weeks, should recover by next year, say analysts at Desjardins Securities.

"On balance, we believe that the metal markets are well positioned to "weather the storm" and would suggest investors remain overweight the sector," said analysts John Redstone and John Hughes.

Despite lowering price targets on almost all of their combined 20 mining stocks under coverage due to lower earnings and price forecasts for the remainder of the year, the analysts remain bullish on the sector and noted that significant upside is still reflected in their recommendations.

Their top picks remain Thompson Creek Metals Company Inc. and HudBay Minerals Inc., both rated "buy" with price targets of $18 and $13.25, respectively.

"This reflects our belief that the recent sell-off has been 'overdone,' " they wrote, adding that the low level of inventories combined with a limited increase in supply and continued industrialization of China will continue to have a positive impact on the sector.

Mr. Redstone and Mr. said inventories are well below "normal" levels for all major metals, including copper, aluminum, nickel and zinc, leaving metal markets well positioned to absorb a U.S. recession given the limited downside for US demand.

They added that healthy consumption growth in zinc and lead will result in higher prices in the future, while consumption growth rates in the beleaguered copper, aluminum and nickel markets will pick up through 2009.