S&P warns La Niña could disrupt Australian mining operations
A new Standard & Poors (S&P) commodities report suggests Australian miners may face disruptions due to the likely return of the climate phenomenon La Niña.
The new study suggests iron ore, coal, nickel and copper producers may be particularly impacted by a La Niña-associated shift in global weather patterns and temperature extremes.
S&P said La Niña’s impact on global metals markets will be focused primarily on the extraction and transportation of raw materials, with mining and transport operations in Australia, Southeast Asia and Africa susceptible to disruption arising from heavy rainfall and flooding.
Rainfall up
The US National Oceanic and Atmospheric Administration’s Climate Prediction Centre has estimated there is currently a 70% likelihood of La Niña developing during Q3 2024 and persisting into Q1 2025.
Forecasts suggest that Australia can expect heavier-than-average rainfall and increased cyclone activities.
The S&P report said similar impacts were felt across New South Wales and Queensland during the prolonged “triple-dip” La Niña that persisted from September 2020 to February 2023.
Seaborne shipments
With Australia accounting for more than half of all global seaborne metallurgical coal shipments, that sector was especially exposed.
La Niña’s impact, compounded by weak Chinese demand at the time, led to an 18% fall in annual export volumes between 2019 and 2023.
While not to the same extent as coal, Western Australia’s iron ore sector would also be vulnerable to the effects of La Niña over and above the seasonal reduction in volume as WA’s iron ore ports and mines shut down on a regular basis during the November to April cyclone season.
Copper impact
S&P said markets for copper may also face a heightened risk of disruption owing to the increased incidence of dry weather in Chile.
South America experienced one of the worst droughts on record at the end of the 2020-23 La Niña event, with the three year water shortage in Chile reflected in a commensurate drop in copper output.
Chile’s annual copper production fell 7.5% during that period, with producers blaming the persistent lack of water for lower ore grades and delays to major investment projects.
Energy usage
S&P said La Niña’s impact on the global energy sector has previously been evident in terms of both supply and demand, with extreme weather events serving to disrupt extracting and refining operations, while cooler temperatures increase demand for electricity and heating in certain areas.
The increased frequency and intensity of hurricanes associated with El Niño that endanger US Gulf Coast energy infrastructure mean that supply-side effects should occur mainly within the Atlantic basin.
The National Oceanic and Atmospheric Administration is predicting an “above average” Atlantic hurricane season, with up to 25 named storms, 13 hurricanes and seven major (Category 3 or higher) hurricanes forecast, against averages of 14 named storms, seven hurricanes and three major hurricanes.