CITIC Securities: How to interpret the high-certainty commodity market in the 2026 El Niño incident?
The Zhitong Finance App learned that CITIC Securities released a research report saying that the 2026 El Niño incident is highly certain. The monitoring indices of China's National Climate Center and the US National Oceanic and Atmospheric Administration have both reached strong El Niño thresholds, and it is predicted that they will continue to rise during the year, and the intensity of the incident may reach the magnitude of the three rounds of extreme events in history. Among agricultural products, palm oil and sugar have the clearest transmission chain, which is the direction of high degree of benefit; coffee is differentiated within varieties; wheat is triple squeezed by the El Niño drought, soaring fertilizer costs, and the blockage of logistics in the Black Sea, and the upward trend is obvious. In terms of basic metals, potential supply disruptions in copper and aluminum due to El Niño may be amplified by structural shortages; lithium may also drive upward prices due to the fragility of the solar evaporation process in Chile's salt lakes.
CITIC Securities's main views are as follows:
The 2026 El Niño incident is likely to be intense.
According to CCTV reports, since mid-July, the Niño 3.4 index monitored by China's National Climate Center has stabilized above +2.0°C; the Niño 3.4 index updated by the US National Oceanic and Atmospheric Administration's Climate Prediction Center on August 5 has reached 2.6 and is predicted to continue to rise during the year. NOAA CPC believes there is a 97% chance that the El Niño phenomenon will continue until early spring 2027; the World Meteorological Organization and the Australian Bureau of Meteorology have also issued warnings. The direction of judgment given by these WMO is very consistent. The intensity of the 2026 incident may reach a magnitude similar to the three rounds of extreme events of 1982-1983, 1997-1998, and 2015-2016.
Among agricultural products, palm oil and sugar have the clearest transmission chain and the most stable historical elasticity.
Palm oil rose by three digits in all three rounds of superpower events, which is rare in the statistics of the three El Niño events; the current round of dipole resonance with the Indian Ocean means that Southeast Asia will bear the pressure of drought in both oceans at the same time, which generally reflects price pressure after 9-12 months of production cuts. Sugar is next. According to the Indian Sugar Industry and Bioenergy Manufacturers Association, India's sugar production will fall short of demand in the next year, and current stocks are the lowest since 2016. The Indian government banned sugar exports in May. The bank determined that under low inventories combined with export bans, the risk of rising sugar prices exceeded the historical average.
Cocoa and coffee are not clearly affected, while wheat is being affected geographically.
There is too much rainfall in West Africa during the El Niño cycle. Cocoa trees are afraid of flooding, and production may be clearly impacted, but the West African government's pricing policy and inventory buffers have weakened the sensitivity of prices to supply shocks, and the degree of certainty is lower than that of palm oil and sugar. Coffee shows differentiation within varieties: Arabica is at a standstill due to a reduction in the risk of frost in Brazil, Robusta faced early supply overdrafts due to Vietnam's drought, and price differences within varieties are worth paying attention to. On the grain side, wheat faces triple independent pressure from Australia's drought, soaring fertilizer costs, and blocked logistics in the Black Sea. According to the Times of India, India imported about 70% of urea and 60% of natural gas from the Gulf countries in 2025, and Brazil's dependence on fertilizer imports reached 80-85%. Hormuz disturbances drove up costs; Odessa's monthly throughput fell from 6 million tons to about 4 million tons, and freight rates doubled. The bank believes that the market may have underestimated the combined effects of fertilizer and logistics.
Basic metals are also affected by El Niño, and the vulnerability of supply disruptions is prominent.
There is a shortage of copper concentrates. Floods in South America have lowered Chile's production expectations, and the African drought has also reduced production guidelines for several local copper mines. Aluminum faces three-way pressure from Yunnan hydropower, export controls in Guinea, and the Australian drought. The bank believes that the El Niño premium for aluminum has yet to be fully priced. The contraction in nickel supply due to El Niño may result in Indonesian quota cuts, but the degree of certainty is lower than that of copper and aluminum.
Lithium is the most vulnerable variety in terms of supply.
According to data from the Deputy Department of International Economic Relations of the Ministry of Foreign Affairs of Chile, Chile accounts for 19% of global lithium production in 2025, and is mainly due to traditional solar evaporation. El Niño may cause a significant increase in local precipitation and a significant decrease in evaporation efficiency. Currently, the global market is in a tight balance, and the price-leveraging effect of marginal reductions may be very obvious.
Risk factors:
Geopolitical risks exceeded expectations, global climate change exceeded expectations, US inflation exceeded expectations, global economic growth fell short of expectations, the Federal Reserve's monetary policy fell short of expectations, and the monetary policies of other central banks around the world fell short of expectations.