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Commodities have always been cyclical, but already this year we have seen two distinct mini-cycles — down in January, recovering in February and March.

Of course, fundamentals do not change that quickly, but sentiment certainly can. In particular, Chinese sentiment has turned around sharply — from the lowest point in the history of Macquarie’s China steel and copper surveys in January into positive territory.

So how should we view what has happened recently? Have fundamentals improved?

Yes, from an extremely low base in December and January there has undoubtedly been a demand recovery. We would term what has happened as a “sub-trend to trend” move. For example global steel demand looks to have improved from around minus 6 per cent year on year to perhaps minus 2 per cent.

At the same a time, a degree of confidence has returned helped by further loosening of the monetary policy from central banks. With it commodity order books have improved, helped also by a seasonal pick-up in demand.

However, outlook for 2016 is not great and we would be cautious on hopes of further upside in prices as demand is not aggressive enough.

Across the main metals and bulk commodities we cover, the majority will see negative year-on-year supply growth this year. Given global mining capital expenditure peaked in 2012 and adding the typical lag in the delivery of big projects, we always felt 2016 would be the year where a lack of new mines would be acutely felt.

While this is helpful in bringing markets back towards balance with demand expected to be sub-trend, inventories high and many markets starting from an oversupplied situation, large stockpiles remain for most commodities.

As of yet, there are few raw material constraints that have the potential to become inflationary in the near future with zinc the notable exception.

The part the oil price has played in aiding the recent recovery should not be underestimated. Indeed, the correlation between oil and copper over the past six months has been strong. Oil does two things for other commodities; it drives down costs and also attracts (or dissuades) commodity investment.

While it is too early to say that the oil rally has broken the wider deflationary cycle in mining, particularly as we believe the rally itself is not backed by fundamentals as of yet, it has helped to attract interest back towards commodities as a whole. Oil remains crucial to the wider commodity cycle, and will have to pull other commodities with it.

In line with many market commentators, we feel recent price moves have been difficult to justify from a fundamental perspective. Given this, it is important to consider where we could all be wrong. One is Chinese construction.

Although we expect strong sales, 2016 will be a year of destocking. Developers have been tasked by the Chinese government with running down property inventory, particularly in smaller, provincial cities.

This means that construction activity should be much lower than sales this year and thus a drag on commodity demand. Should indicators show a more sustained recovery in property investment or new start activity, following on from the surprisingly strong February data, demand expectations will improve and the recent price moves may be considered more sustainable.

For us, this remains only a possibility given that it would involve a U-turn in the government approach to property activity, which in itself is one of the pillars of the much vaunted “supply-side reform” agenda.

In summary, we do not think the overarching challenges in commodity markets are set to significantly diminish. While demand for commodity-containing goods may be good, and certainly better than 2015 owing to destocking, raw commodity demand will not.

The Commodities Note is an online commentary on the industry from the Financial Times

Colin Hamilton is the head of commodities research at Macquarie