Miners, commodities traders brace for La Niña

Unusual and massive storms flooded Chile’s Atacama Desert, heart of the country’s copper industry, in March last year. (Image: Screenshot via YouTube)

The El Niño weather event, considered one of the strongest in almost two decades due to droughts caused in Asia and South America, as well as flooding and cyclones in Australia last year, has already peaked and it is likely to be followed by the opposite phenomenon.

According to Australia’s Bureau of Meteorology the world is now likely to feel the effects of a cooling in the equatorial Pacific Ocean, known as La Niña. This extreme of the same naturally occurring cycle that brings El Niño, tends to cause rainfall in Southeast Asia and Australia and dryness to the U.S. Midwest.

And while the effects of these weather events are wider and more immediate on agricultural markets, the mining industry is not immune.

During the 2010-11 La Niña, Australia’s thermal and coking coal mines in Queensland were hit by flooding wreaked by the associated cyclones and heavy rain. It also threatened Indonesia, the source of over half of India's thermal coal, and a top nickel and copper producer.

El Niño, in turn, took a toll in the copper industry. Low rainfall was behind Freeport’s Grasberg output reduction in Q3 last year. It also forced Barrick Gold (TSE:ABX) to shut down production at its Porgera mine in Papua New Guinea due to drought in the region.

And Chile’s copper-rich north was hit by torrential rains and floods, causing producers to cut output forecasts and prices to jump.

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