How will El Niño effect Base Metals Market this year ?

El Niño has arrived, according to a report released by the National Oceanic and Atmospheric Administration (NOAA) in early March.

What is El Niño?
El Niño is the warm phase of the El Niño Southern Oscillation (commonly called ENSO) and is associated with a band of warm ocean water that develops in the central and east-central equatorial Pacific (between approximately the International Date Line and 120°W), including off the Pacific coast of South America.

El Niño Southern Oscillation refers to the cycle of warm and cold temperatures, as measured by sea surface temperature, SST, of the tropical central and eastern Pacific Ocean.

How will El Niño effect Metals Market this year?

“Extreme weather related to El Niño, such as floods or droughts, will be a big threat to production in world’s major metal producing countries, including Chile, Peru, Indonesia. Supply disruption resulting from this will boost the market,” said an analyst from COFCO Futures in SMM interview.

Another analyst from Guosen, however, expects the impact on metals market to be indirect, saying the disruption on production in major producing countries remains to be seen. But, he adds that copper price will likely stage a rally in 2Q.

Foreign investors generally expect a boost on the market from El Niño, especially copper and nickel prices.

The Most Important US Events Of 2014, According To Twitter

When it comes to social networks, Instagram is where the world's best food photographers reside, Facebook is where "cool parents" and ad-clicking robots can be found, while Twitter is where the up to the minute super-informed, sophisticated intelligentsia hides. At least according to Twitter. So what did said sophisticated audience find to be the most important and talked about American events of the year? The following infographic from Echelon Insights gives the answer:

The top 10 US stories of 2014 were:

1. Ferguson
2. Midterms
3. Ebola
4. Israel
5. Iraq
6. Russia/Ukraine
7. Sterling/Clippers
8. Guns
9. Obamacare
10. Marijuana

What is more interesting is that the top 2 most talked items were defined as such by Liberal Activists, where the topic dearest to Conseratives' hearts, Guns, was only 8th in the combined ranking.

Which begs the question: while the media may or may not have a liberal bias, it does appear that the main talking points in at least media distribution outlet are set by those a liberal bent. Maybe simply because they have far more time to retweet and engage in meaningless Internet debate?

Meaningless internet speculation aside, here is how 2014 progressed through the eyes of Twitter users.

Polar Vortex 2.0 Arrives - All 50 States Will Freeze Tonight

3 months ago we warned US economic growth faced a challenge more powerful than any Fed-sponsored miracle could handle and 3 weeks ago Yellen's worst nightmare began to loom on the chilly horizon. But tonight, from the depths of the night, the cruel monetary-policy-nullifying devil of Polar Vortex 2.0 arrives as all 50 states (yes even Hawaii) will see temperatures drop below freezing...

On the bright side, companies will have more than just strong dollar and weak foreign growth to blame for earnings weakness... weather is back baby!!

h/t @Met_mdClark

*  *  *

Just one thing for those celebrating the drop in gas prices at the pump as some tax cut for the consumer(which it is not - it merely allocates the same aggregate spending dollars from gas to a different consumable - leaving aggregate spending just the same - or less in fact should consumers, as in Japan's balance sheet recession, choose to minimize debt as opposed to maximize profits or living standards with their extra cash)... this is what happened to home electricity bills last year... (now is that a tax hike for the consumer?)

*  *  *

Now, the only question is how the resultant tumble in Q4 GDP will be used by the Fed and econo-pundit talking heads to justify a further delay in rate hikes, which consensus expects to take place in Q2 2015 at the latest as a result of recent seasonally massaged "strong data", or better yet, force the Fed to resume liquidity injections once it is revealed that the ECB's intervention is limited to verbal jawboning, while Japan's runaway import cost inflation and plunging real wages lead to a revulsion against Abenomics and Abe in 2015, and a premature end to Japan's epic hyper-reflation experiment and the best laid plans of Goldman Sachs to boost "risk assets" and Goldman year end bonuses.

*  *  *

Half The World's Christians Live In These 11 Nations

Having previously mapped the world's Muslims, we thought it only politically-correct (and fair-and-balanced) to highlight where the world's Christians make their home...

But what about the Jews, Buddhists, Hindus, and others...

 Source: @ConradHackett and Pew Research

The CDC's Worst Nightmare (Or What Nigeria Has To Look Forward To)

With more than 1600 people in Guinea, Liberia, and Sierra Leone having contracted Ebola since March, CDC Director Frieden's "deeply concerned about Lagos, Nigeria" worst nightmare looks set to come true as the pace of cases (and deaths) in the nation begins to accelerate. As the following chart shows, Nigeria - now in a state of national emergency - has this to look forward to (though on a scale significantly higher since population density is dramatically higher).

This is already the worst outbreak in history...

And it's getting worse...

Source: NY Times

The Polar Vortex Is Back In The Middle Of July.

While every single economist and "straight to CNBC" pundit was quick to blast the atrocious economic performance in Q1 as solely due to the "harsh weather", what has emerged in various retail earnings reports so far in Q2 is that, drumroll, they lied. In fact, as one after another "stunned" retailer admits, the depressed spending observed during Q1 continued, if not deteriorated even further, in the second quarter. Which means only one thing, the same thing we said back in January: as a result of Obamacare, the declining credit impulse resulting from the Fed's tapering, and a ongoing contraction in global trade as the world slides back into recession, the US economy is on the verge of stalling and may well enter into a tailspin if one or more exogenous events take place in a centrally-planned world that is priced to perfection.

To be sure, one of the potential scapegoats we highlighted previously was the replacement of the polar vortex with what we dubbed the "solar vortex", ala El Nino, which as we further reported, has already been blamed in advance by the Bank of Japan for a spending collapse set to take place in the second half of 2014, the year when the Japanese economy now almost certainly re-enters recession.

But just to make sure that the abysmal Q1 GDP which has now spilled over into Q2 and will likely see the US economy growing in the mid-2% range, has a sufficiently broad "excuse" in the third quarter of the year, here comes - in the middle of July - the polar vortex 2.0.  As WaPo reports, "However you choose to refer to the looming weather pattern, unseasonably chilly air is headed for parts of the northern and northeastern U.S at the height of summer early next week."

Bearing a haunting resemblance to January’s brutally cold weather pattern, a deep pool of cool air from the Gulf of Alaska will plunge into the Great Lakes early next week and then ooze towards the East Coast.

The atmospheric impact will not be nearly as dramatic, but still temperatures are forecast to be roughly 10 to as much as 30 degrees below average.

This means that in parts of the Great Lakes and Upper Midwest getting dealt the chilliest air, highs in this region could well get stuck in the 50s and 60s – especially where there is considerable cloud cover.

And focusing on next week specifically, "Wednesday morning’s lows may drop into the  40s over a large part of the central U.S."

 

Highs may struggle to reach 80 in D.C. next Tuesday and Wednesday with widespread lows in the 50s (even 40s in the mountains).

More from WaPo:

What’s behind this unusual winter weather pattern primed for the dog days of summer?  A lot of it is simply chance (randomness), but Weather Underground’s meteorologist Jeff Masters says Japan’s typhoon Neoguri is playing a role in the pattern’s evolving configuration:

….the large and powerful nature of this storm has set in motion a chain-reaction set of events that will dramatically alter the path of the jet stream and affect weather patterns across the entire Northern Hemisphere next week. Neoguri will cause an acceleration of the North Pacific jet stream, causing a large amount of warm, moist tropical air to push over the North Pacific. This will amplify a trough low pressure over Alaska, causing a ripple effect in the jet stream over western North America, where a strong ridge of high pressure will develop, and over the Midwestern U.S., where a strong trough of low pressure will form.

What amazes me most about the pattern is not so much the forecast temperatures, but the uncanny similarities in the weather patterns over North America seen in both the heart of winter and heart of summer. All of the same features (refer to the map at the top of this post)  apparent in January are on the map in mid-July: low pressure over the Aleutians (blue shading), a large hot ridge (yellow and red shading) over the western U.S., the huge cold low or vortex over the Great Lakes (blue and green shading), and then the ridge over northeast Canada (yellow and red shading).

It’s not at all clear what this means or what, if anything, it portends.  Weather patterns cycling through a certain circulation regime can repeat (and we’ve seen this pattern multiple times since November-December), but with El Nino forecast to develop, the global configuration of weather systems is likely to change.

So the question is: just how profound of an adverse impact on Q3 GDP (because remember: weather anomalies are never additive to GDP; only wars can do that in a Keynesian world) will the second, summertime coming of polar vortex have on the US economy? Judging by the laughable farce that the economic profession has devolved to, desperately seeking to "explain away" any deviation from a priced to perfection growth rate, if only that of the Fed's balance sheet, not to mention why its forecasts are always wrong we are likely to find out very soon.

El Nino Seen Starting as Early as July as Pacific Warms Up

An El Nino will probably start as soon as July, according to the Australian government forecaster, adding to predictions for the event that can transform weather around the world and roil commodity prices.

All the climate models surveyed indicated that an El Nino was likely this year, with six of seven models suggesting that thresholds for the event may be exceeded as early as July, the Bureau of Meteorology said in a statement today. A warming of the Pacific Ocean, which drives the changes by affecting the atmosphere above it, will probably continue in the coming months, the Melbourne-based bureau said.

El Ninos can bake Asia, while bringing wetter-than-usual weather to parts of South America and the U.S., challenging farmers from Indonesia to Brazil with too little rain or too much. Palm oil and sugar were listed by Goldman Sachs Group Inc. this month as among crops that may be affected if an El Nino sets in. The World Meteorological Organization warned last week of a dramatic rise in world temperatures should an El Nino reinforce human-induced warming from greenhouse gases.

“El Nino has an impact across much of the world, including below-average rainfall in the western Pacific and Indonesian regions,” the bureau said. “For Australia, El Nino is usually associated with below-average rainfall, with about two thirds of El Nino events since 1900 resulting in major drought over large areas of Australia.”

Last Event

The last El Nino to form was in 2009 to 2010, and since then the Pacific has either been in its cooler state, called La Nina, or neutral. Disruptions associated with El Ninos have been most important for agriculture markets, with palm oil, cocoa, coffee and sugar most affected, Goldman analysts including Jeffrey Currie wrote in an April 13 report. An El Nino would boost risks to soft-commodity price forecasts, they wrote.

The chances of an El Nino have increased to 65 percent from 52 percent, the U.S. Climate Prediction Center said on April 10. There are signs that an El Nino is imminent, presaging changes to global weather patterns, the United Nations’ World Meteorological Organization said April 15. Two weeks ago, the Australian bureau put the odds at more than 70 percent.

Powerful 7.5 magnitude earthquake strikes Mexico, buildings shaken in capital

A magnitude 7.5 earthquake hit Mexico on Friday in the western state of Guerrero, north of the resort of Acapulco. The quake shook the capital Mexico City for at least 30 seconds, with building swaying as people fled on to the streets.

The city was reportedly more crowded than usual because of the Easter holiday. Despite the relative severity of the quake there are no immediate reports of any major damage.

7.5-magnitude quake strikes off Papua New Guinea

An earthquake struck late Saturday off Papua New Guinea's eastern coast with a preliminary magnitude of 7.5, the U.S. Geological Survey said.

The quake struck at 11:27 p.m. (9:27 a.m. ET) and occurred at a depth of 19 miles (32 km), the USGS said.

It was centered 47 miles (75 km) southwest of Panguna, Papua New Guinea.

After the quake, the Pacific Tsunami Warning Center issued a tsunami warning for Papua New Guinea and the Solomon Islands, but then canceled it. Saturday's incident is the latest in a series of seismic events in the region over the week. They began with magnitude-7.1 and magnitude-6.5 earthquakes on April 11, just to the northeast and southeast, respectively.

Since then, 45 earthquakes of magnitude-4.5 or greater have occurred nearby. Earthquakes with magnitudes between 7.0 and 7.9 are classified by USGS as "major," second only to "great," which are 8.0 and up.

Teck's Red Dog zinc mine 'operating as normal' after earthquakes

Two earthquakes, a magnitude 5.5 and a magnitude 5.4, struck near the Red Dog Operations zinc-lead mine in remote northwest Alaska, the U.S. Geological Survey said.

It said the quakes, which struck minutes apart, were centered just a few miles (km) southeast of Red Dog Mine, the world's largest producer of zinc, which is operated by Canadian mining company Teck Resources.

Teck Resources said on Friday its Red Dog zinc mine, the world's largest, in Alaska is operating as usual after two earthquakes struck a few miles from the site.

"Mild tremors were felt at Red Dog operations. There were no safety concerns and the mine is currently operating as normal," a spokesman said in an email. 

El Nino may spoil bull party

El Nino, which may affect India’s South-West Monsoon and result in drought, could derail the bull party in the equities market, analysts and brokers fear.

This week, the Austrlian Bureau of Meteorology said there was more than 70 per cent chance of the El Nino occurring, while the US Climate Prediction Center said there is 50 per cent chance of the phenomenon, resulting from rise in the sea surface temperature in the Pacific Ocean, setting in later this year.

Next week, the India Meteorological Department will come out with its projections of this year’s monsoon and chances of El Nino setting in.

May cause strategy change

Global investment banker and institutional securities firm Jefferies said El Nino is one of the extremely few extraneous events that could cause the new Government to change the focus away from investment-inducing, pro-economic growth policies.

“Overall, we are not too concerned about El Nino currently despite rising risks.

“While the situation should be monitored, there is no reason to reduce our positive bias on the market both ahead of and after the election, at least for the next three months,” it said.

In the worst case, the weather could become a substantial factor around the Budget time in mid-July, Jefferies said.

According to Bank of America-Merrill Lynch, the real test for the investors will be impact of the three big ifs facing the country — the polls, the El Nino and the dollar.

BNP Paribas said El Nino-driven rainfall deficiency could enhance profitability of plantation companies but depress margins of home and personal care consumer companies.

Inflation, GDP concerns

Singapore-based brokerage DBS on Friday said inflation in India may jump to over 8.5 per cent and GDP growth may slip to 5 per cent in the current fiscal if the much-feared El Nino threat plays out this year.

Dipen Shah of Kotak Securities said: “We continue to maintain that, in the short term, markets will continue to be volatile at current levels with a positive bias. Focus will shift to growth, interest rates and valuations once the political event is out of the way.

“Valuations are above the long-term average and there is a possibility of sub-normal monsoons. These can act as headwinds for the markets in the medium term.”

Unaffected earlier

El Nino is likely to set in only after July, but there have been occasions when India had gone unaffected by the weather phenomenon.

Already, Australia and parts of South-East Asia are reeling under hot weather and prolonged dry period. On the other hand, central and north-western parts of India have received rains and hailstorm during February-March, resulting in better water storage level.

Currently, the level in the 85 major reservoirs is more than the average seen in the last 10 years.

No disruption to supply, ports operating as normal following earthquake - Antofagasta

Chilean copper miner Antofagasta has confirmed its operations were not affected by the 8.2-magnitude earthquake that struck off the northern coast of the country.

The ports for Pelambres, Esperanza and Michilla were all evacuated after a tsunami warning was issued, but this has now been lifted. 

Massive 8.2 Quake Hits Near Chile Coast, Tsunami Warning Issued; Residents Evacuating

At shortly after 1945 ET,  a massive 8.2 (revised up from 8.0) earthquake hit close to the coast of Chile:

• *MAGNITUDE 8.0 QUAKE HITS OFF COAST OF CHILE, USGS REPORTS
• *CHILE QUAKE MAGNITUDE REVISED UP FROM 8.0 TO 8.2 BY USGS
• *FLASH: TSUNAMI WARNING ISSUED AFTER MAGNITUDE 8.0 QUAKE HITS OFF
• *QUAKE CUTS ELECTRICITY SUPPLY TO MUCH OF ARICA, CHILE: TVN

The BBC reports the quake was shallow (which means it felt more powerful) and the tsunami wave's arrival is imminent. 

Copper prices was jumping on the news as the region is an active mining area.

Following reassurances:

• *TECK SAYS QUEBRADA BLANCA COPPER MINE UNAFFECTED BY QUAKE
• *PAN PACIFIC SAYS NO DAMAGE AT CASERONES COPPER MINE AFTER QUAKE

For some context of how big this is...

"Polar Vortex" Shock

The "polar vortex" shock has arrived, only this time it is not in the form of another 12 inches of overnight snow accumulation but in the shape of household utility bills. A reader was kind enough to send us his just received ConEd bill for the month ended Februery 10. The result speaks for itself. It also speaks for where so much of US household disposable income will go in first quarter. 

And unfrotunately it will get worse before it gets better. On the back of a rapid decline in the "glut" of low cost natural gas (as stockpiles are drawn down to the lowest level since 2004) and the shift in forecast (that the freezing weather could last well into March), Natural gas futures are soaring (up over 10% today). This is the highest front-month futures contract price since December 2008 as "the possibility of periodic shortages now looms."