El Niño: Negative on agri, positive on mining according to World Bank report

MANILA, Philippines - The El Niño weather phenomenon will have a negative impact on the country’s agriculture sector, but a positive effect on the mining sector.

In its special report, “Understanding El Niño: What does it mean for commodity markets?” the World Bank said the drier conditions creates a positive effect on the Philippines’ nickel mining sector.

“Drier conditions during the wet season could enhance bauxite production in Malaysia and the nickel output in the Philippines,” it said.

Meanwhile, Nickel Asia Corp. Chief finance officer Emmanuel Samson was quoted by Reuters as saying the El Niño has a positive impact on their operations.

“The dry weather means our mines can continue to be productive in October or November when the season of heavy rains usually starts,” Samson said.

Normally, mining operations come to a halt during wet season.

But the El Niño-induced dry spell may remain until the first semester of 2016.

Nickel Asia expects ore exports to hit a record of over 19 million wet metric tons (WMT), versus 17.9 million WMT in 2014.

Lower January-June rains have already helped it ship 9.68 million WMT over the period, up 25 percent year on year.

The Philippines has one of the world’s largest nickel reserves. It produced 330,000 metric tons in 2014. The Chamber of Mines of the Philippines believes the country’s 27 nickel mines could produce 25 million metric tons of nickel direct shipping ore annually.

But producers are concerned over the price slump.

At the start of the second semester, China’s steel producers reduced demand due to their weakening economy.

This condition has forced producers to either sell their products to other countries or store them in their warehouses temporarily. The Philippines accounted for almost all of China’s nickel ores and concentrate imports in the first half of this year.

In contrast, the country’s agriculture sector is taking a beating. Initial reports from the Department of Agriculture said crop loss may have reached over P3-billion in the early stages of the El Niño.

The National Economic and Development Authority (NEDA) has already recommended additional rice importations in the first semester of 2016 to ensure supply reserves while rice import prices remain depressed.

The World Bank noted rice prices declined by 7.5 percent in the second quarter of 2015.

El Niño is a weather pattern which causes the winds of the equatorial Pacific to slow or reverse direction, in turn raising the temperature of waters over a vast sea area of the Central and Eastern Pacific Ocean. Higher temperatures cause below- or above-normal precipitation in many regions, especially in the southern Hemisphere. The impact is most noticeable in South America, East Asia, South Asia, and Australia, while there is a modest impact in the northern hemisphere.

El Niño episodes occur every two to seven years and last nine to 12 months.

Typically, they develop during April-June and reach maximum strength during December-February. The strongest El Niño on record occurred in 1997-98.

“According to most forecasting models, the current El Niño may be the strongest since detailed data have been available. It is expected to reach – and remain – in the “strong” or “very strong” category throughout the end of the southern hemisphere’s growing season, and into early spring (and possibly summer) in the northern hemisphere,” the World Bank report said.