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ANZ Research on Thursday flagged that, the likely development of a La Niña weather system into the second half of the year could have sizeable impacts on short-term demand and supply patterns across a range of commodities.
Meteorological centers including the U.S. NOAA and the World Meteorological Organization estimate a 60-70% likelihood of such a weather event developing during Q3 2024 and persisting into Q1 2025.
La Niña tends to produce heavy rain in Australasia, Asia and West Africa but drought in the Americas, and in the past, this has disrupted supplies of coal and iron ore from key producers such as Australia. It also increases the number of cyclones and hurricanes in the Indian Ocean and Gulf of Mexico.
“If a strong La Niña system eventuates, we expect it would raise supply risks for oil, natural gas, coal and iron ore. Supply side issues have been an ongoing headwind for many commodities, as recent wars and sanctions have disrupted energy markets, and complex operating conditions are making metals investments vulnerable to disappointment,” ANZ analysts noted.
“La Niña would also likely lead to a spike in energy demand and potentially a rise in prices, as it the colder-than-normal temperatures it causes in the Northern Hemisphere increase heating demand.”
BMI, a unit of Fitch Solutions, meanwhile said the anticipated return of La Niña presents downside risks to metal and mining outlooks due to potential weather-related disruptions.
Should La Niña materialize later in the year, mining operations in Asia may face heavy rainfall and flooding, particularly affecting Australia and Indonesia, while Latin America, notably Chile, could experience drought and subsequent water shortages, the brokerage said.
That said, BMI highlights that the exact impact of La Niña remains uncertain and subject to its intensity and duration later in 2024.
In 2020-2023, La Niña-boosted wet weather conditions also wreaked havoc in Indonesia, bringing flooding and landslides and affecting mine sites. In February 2023, Freeport-McMoRan (FCX) suspended operations at its Grasberg mine after floods.
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