How should we view this year's super El Niño phenomenon?

During the summer of the year when an El Niño event occurs, typhoon intensity over China tends to be stronger—this is the real reason behind the frequent typhoons hitting China this summer. Then, during the autumn and winter of that same year—i.e., the period we are about to face—precipitation in southern China may increase significantly, leading to abnormal rainfall across southern provinces. Meanwhile, the probability of a nationwide warm winter exceeds 70%. Finally, during the spring and autumn of the following year—i.e., the first half of 2027—severe flooding may strike China’s Yangtze River Basin and Jiangnan region. The most typical historical precedent is the 1998 floods. Moreover, this El Niño event coincides with the broader backdrop of global warming; meteorological agencies across multiple countries have already issued warnings that 2027 is highly likely to become the hottest year ever recorded in human history—with both the geographic extent and intensity of extreme heat potentially surpassing those of this year. So the true test is not this year—but next year. Next year is when El Niño will truly unleash its full force; what we’re witnessing this year is merely light drizzle. And don’t assume El Niño affects only climate and environment—it is deeply intertwined with our vegetable baskets and wallets. Historical experience shows that every major El Niño event ultimately reverberates across the economy and everyday life. Climate directly influences industrial and agricultural production. Once global climate patterns turn abnormal, it triggers worldwide agricultural shortfalls and commodity price volatility—ultimately affecting everyone’s daily expenses. According to forecasts by the UN Food and Agriculture Organization (FAO), this El Niño could cause global cereal output in 2026–2027 to decline by 1.9% year-on-year, with wheat production falling by 4.3%. Southeast Asia and South Asia—the regions hardest hit—may see rice yields drop by 20%–50%. If you enjoy Thai fragrant rice or Indian basmati rice, expect significantly higher prices. Beyond staple grains, price hikes for other cash crops will be even more pronounced. Crops extremely sensitive to climate—including sugar, coffee, palm oil, natural rubber, and sugarcane—are all vulnerable to droughts and floods, risking reduced harvests. Historical data shows that international sugar prices rise on average by over 30% during each major El Niño event—potentially triggering price increases for related beverages and desserts. Moreover, the impact extends beyond rice, flour, cooking oil, and grain: in the broader commodities space, nonferrous metal prices may also surge. Take nickel, for example—a metal primarily mined in Indonesia (Southeast Asia). Drought conditions there can severely curtail hydropower supply, thereby constraining mining capacity. Historically, global nickel prices have risen on average by 13% during El Niño events. Similarly, copper mines in South America may suffer output declines due to extreme weather. More critically, high temperatures drive surging demand for cooling electricity, while droughts reduce hydroelectric generation. With electricity demand rising on one side and hydropower supply shrinking on the other, energy prices inevitably rise—leading to higher electricity tariffs in many countries and further straining household budgets. Put simply: over the coming year, we may well experience a broad-based inflationary wave driven by El Niño—one tightly interwoven with our daily lives. In response to this unprecedented super El Niño, national authorities have long since mobilized: climate departments are closely monitoring developments; emergency management agencies stand ready; water resources departments are conducting scientific dispatching; agriculture and rural affairs departments are implementing disaster prevention and mitigation measures; and transport, power, and telecommunications sectors have all entered a state of high alert—prepared at all times to confront this formidable challenge.

El Niño is rewriting the 2026 commodity supply-demand balance sheet.

Timing-wise, El Niño’s impact on Northern Hemisphere cotton production concentrates in Q3 and Q4 of 2026 (coinciding with India’s and the U.S.’s cotton growing seasons), providing clear support to futures contracts such as 2609 and 2701—and beyond. VIII. Apples: Overlap of main producing areas’ flowering and fruit-swelling periods with drought risk Assessing El Niño’s impact on apples requires integrating China’s regional climate characteristics. For northern China, El Niño typically weakens the East Asian summer monsoon, shifting the rain belt southward—making northern regions prone to high temperatures and drought. Moreover, northern China tends to experience warmer winters following El Niño events. Two transmission pathways operate simultaneously: First, persistent summer heat and drought lower soil moisture, hindering apple trees’ water absorption. Water stress causes thicker apple skins and smaller fruits than normal—and in severe cases, impairs young fruit development, triggering physiological fruit drop. Second, heat and drought during the fruit-swelling stage hinder nutrient uptake and synthesis, resulting in delayed or uneven fruit coloring. When combined with intense sunlight after bag removal, apples become highly susceptible to sunburn—damaging appearance and lowering premium-fruit yield. Among the past 11 El Niño events, apple output growth markedly slowed in most cases—and output declined sharply in five: 1987, 1992, 1998, 2010, and 2015. This season’s apple trees begin flowering in April. Should frost or cold damage occur during flowering—and drought strike during fruit swelling—premium-fruit yield could suffer. Current weather patterns show overlap between northern production zones’ flowering period and weak cold air activity, leaving localized frost risk still present—requiring continued monitoring. IX. Nonferrous Metals and Energy: Indirect Shocks from El Niño El Niño’s impact on industrial metals is often underestimated by markets. Copper faces the most direct impact. Globally, 30%–50% of copper, gold, iron ore, and zinc production occurs in regions facing acute water stress. Chile—the world’s top copper producer—experiences torrential rains during El Niño, causing mine shutdowns and transport disruptions. Chile’s copper output in February hit its lowest level in nearly nine years, declining year-on-year for seven consecutive months. Codelco’s El Teniente copper mine has partially suspended operations due to heavy rainfall. Kamoa-Kakula mine in the Democratic Republic of Congo has lowered its 2026 output guidance from 380,000–420,000 tonnes to 290,000–330,000 tonnes. Conversely, El Niño-induced droughts transmit impacts via a chain: “water shortage → forced shift to seawater desalination → soaring costs → marginal mines cutting output.” Seawater desalination costs are tenfold higher than groundwater extraction—indicating drought’s effect on copper mining isn’t just simple “dry season → reduced output,” but rather systemic cost inflation squeezing marginal capacity. On the energy front, El Niño’s primary impact on southern China is drought—sharply reducing hydropower generation and forcing thermal power to fill the gap, thereby boosting demand for thermal coal and natural gas. Summer heatwaves also escalate residential cooling electricity demand. However, strong domestic supply-security policies constrain upward pressure on coal prices. Regarding nickel: Indonesia—the world’s top nickel ore producer—typically experiences drier conditions during El Niño years. Hydropower supply falters, yet nickel smelting is extremely electricity-intensive. Any power shortage forces immediate cuts in smelting capacity.

Indonesia Nickel Hub to Cut Production on El Niño-Driven Drought

1 day ago

Smelters at Indonesia's Morowali Industrial Park will reduce nickel pig iron output due to drought-driven water shortages, potentially impacting global supply chains for stainless steel and electric vehicle batteries.

bloomberg

2026-09-21

Indonesia Nickel Hub to Cut Production on El Niño-Driven Drought

Indonesia Nickel Hub to Cut Production on El Niño-Driven Drought

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