I wouldn't pay to much attention to the shorts dropping, it's...

I wouldn't pay to much attention to the shorts dropping, it's not indicative of much at all, other than the shorts finding a convenient exit point after already squeezing the sh*t out of the company. Case in point: LKE currently have a lower percentage of shorts (~2%) than AGY do, and they are a company in deep trouble. On the other hand, PLS, an industry stalwart, have short interest of over 22%. Which one do you think is in more trouble? I'll give you a hint; it's not PLS.

A growing short position can be beneficial if you have imminent, company making news that can catch them off guard (you know, like a long overdue offtake or strategic investment). It would be preferential to have a growing short position to initiate a squeeze (or at least buying pressure) once that news drops. Instead, the shorts have been able to make an orderly exit while driving the share price close to multi-year lows.