The fifth time in six years! La Niña is here, how big is the impact on commodities this time?

Abstract In December 2025, as the world welcomes the New Year, the La Niña climate will have quietly completed its sixth visit—marking the fifth La Niña phenomenon established in the past six years. Although meteorological departments expect this La Niña to be weaker and shorter in duration, under the backdrop of great power competition and the rise of resource nationalism, weather changes are injecting more uncertainty into commodity pricing. The entanglement of the global commodity market with climate fluctuations has always been a history of the "game between nature and the industrial chain." Looking back over the past decade, each occurrence of extreme weather has impacted the commodity market through a chain of "supply disruption - price fluctuation - equilibrium reshaping." For instance, the strong El Niño from 2015-2016 led to drought in Southeast Asia and a reduction in palm oil production, causing palm oil prices to rise by over 50%; during the La Niña cycle of 2020-2021, a cold wave in North America impacted shale oil production, leading to a temporary high in WTI oil prices, while frost in Brazil's main coffee-producing region caused NYBOT futures prices to increase by over 100%; the drought in South America at the tail end of La Niña in 2022-2023 resulted in a more than 50% reduction in Argentine soybean production, pushing up the global soybean meal price center. Climate shocks are often the "gray rhinos" embedded in the global supply chain. In 2026, the narrative of climate disturbances is set to undergo more complex changes. Since the beginning of the year, the La Niña phenomenon has become active again, and the probability of El Niño occurring in the second half of the year has risen to 60%[1]. When "dual peak climate" (the alternation/superposition of La Niña and El Niño) coincides with the rising momentum of global trade protectionism, the destructive power of weather risks may also be amplified. In recent years, the European Union's Carbon Border Adjustment Mechanism (CBAM) has expanded carbon tariffs on steel and aluminum[2], the U.S. Critical Minerals Security Act has raised localization production requirements for key mineral resources such as lithium, cobalt, and nickel[3], Chile has implemented additional tax policies on copper mine exports[4], and Indonesia has introduced export quotas for nickel mines[5]. When the "uncertainty" of natural climate collides with the "rigid constraints" of human policies, the commodity market in 2026 has entered a new phase of "risk nesting." Currently, against the backdrop of rising trade barriers and stricter controls by resource countries, the rapid switching of climate adds further disturbances to the supply side of commodities. This report organizes the characteristics of the La Niña climate this winter and suggests from the perspective of solar cycle activity that the global climate will be complex and variable in the medium to long term, with extreme weather risk events likely to occur frequently under the switching of La Niña/El Niño. Based on this, the report focuses on important sectors such as energy, non-ferrous metals, ferrous metals, and agricultural products, analyzing the paths of weather disturbances and fundamental concerns. Weather Outlook: Current weak La Niña established, may turn neutral in the second quarter, climate pattern switching this summer may exacerbate weather risks NOAA monitoring data shows that sea temperatures in the equatorial Pacific have stabilized below the La Niña threshold, marking the formal establishment of a weak La Niña event for the winter of 2025/26. According to mainstream model predictions, this event is expected to be weak and of short duration, likely turning neutral in the spring of 2026. Against the backdrop of global warming, the cooling effect brought by this La Niña may not be sufficient to cause widespread cold winters[6] However, it still has a typical impact on global circulation and has triggered unconventional precipitation anomalies in some regions [7]. Looking ahead to the medium and long term, solar activity has entered a downward cycle, and historical patterns indicate that this may increase the frequency of switches between El Niño and La Niña events in the next 3-5 years [8], thereby raising the risk of extreme weather. Current models suggest that by the third quarter of 2026, the probability of a climate shift towards La Niña will significantly rise to over 60% [9], necessitating continuous attention to its development trends and potential impacts on the supply and demand of commodities. Impact on Commodities: Differentiated Weather Disruption Paths, Varying Concerns Across Sectors Weather, as a key disruptive variable in the commodities market, has led to synchronous supply and demand adjustments in core sectors such as energy, metals, and agricultural products, but the logic of impact and core concerns exhibit a distinct "same frequency" but "different phase" characteristic—each sector may focus on temperature fluctuations or closely monitor precipitation changes, with differing dimensions of concern and impact paths. Specifically, Energy: Temperature is the core driver. In November-December last year, heating demand in North America drove natural gas prices to rise. At the beginning of 2026, U.S. natural gas inventories were revised down to about 1.2% below the five-year average for the same period, lower than the 4.5% before the heating season began. The high consumption of inventories during the peak season may provide favorable starting conditions for an upward shift in off-season price centers. We maintain our judgment that the U.S. natural gas fundamentals will be tight in 2026, expecting the NYMEX gas price to shift upward to a range of $4-5 per million British thermal units during the off-season; although Europe has experienced a warm winter, natural gas inventories are at low levels, and the demand for replenishment will support the global LNG market. Against the backdrop of increased global LNG supply, we maintain our judgment that the trend of downward shifts in European gas price centers will continue, expecting the Dutch TTF gas price center to shift down to $9-10 per million British thermal units during the off-season in 2026. Additionally, attention should be paid to the potential impact of summer hurricanes on oil production and refining in the Gulf of Mexico. Non-ferrous Metals: Precipitation is the key variable. Heavy rainfall may disrupt production and transportation in major mining areas in Indonesia (copper [10], nickel, bauxite) and South America (copper [11], lithium salt lakes), increasing the interference rate and costs of mines. At the same time, La Niña may influence aluminum prices through electricity costs. Historical data shows that during La Niña years in winter, precipitation in the upper reaches of the Yangtze River and Yunnan in China tends to be low, which may reduce hydropower generation and drive up local hydropower aluminum costs. In the Northern Hemisphere, it may exacerbate cold winter weather, increase energy consumption, and push up electricity and gas prices, also driving up the costs of electrolytic aluminum in Europe. Ferrous Metals: Both temperature and precipitation have trading value. Historical experience shows that electricity consumption in winter and summer often has a strong correlation with temperature conditions. This year's warm winter may suppress domestic coal heating consumption, making it difficult for coal prices to perform well; regarding precipitation, excessive rainfall in northeastern Australia may affect coal shipments, while the rainy season in Brazil may have regionally differentiated impacts on iron ore production under the La Niña backdrop. This year, under a weak La Niña, the overall shipping trend is expected to remain strong Agricultural Products: The impact of water and heat conditions on the fundamentals is the most direct, but the weather effects vary by crop. For soybeans, Brazil's soybean yield is sensitive to precipitation, but this year, the water and heat conditions during Brazil's soybean growing season are generally good, with minimal influence from the weak La Niña, leading to strong expectations for a bumper harvest in Brazil. Market focus has shifted to the South American concentrated listing period and the export competition landscape with U.S. soybeans. We expect this may suppress the upper space of international soybean prices in the short term, maintaining a judgment of 1000-1150 cents/bushel. Regarding palm oil, the current weak La Niña has limited impact on Southeast Asian production, and market trading focus is on the high inventory in Malaysia and the positive expectations for Ramadan stocking demand. We maintain a bullish view on palm oil prices in the first half of 2026. In the medium to long term, the probability of an El Niño occurring in 2026 is relatively high. Through data backtesting, we find that winter El Niño may significantly suppress palm oil yield. Since 1970, after four strong El Niño events, the average decline in Malaysia's oil palm fruit yield has been significant, at 12%, 24%, 14%, and 15%, respectively. We need to be cautious of the lagging reduction impact of El Niño on palm oil production in 2027. For winter wheat, this year's late sowing of winter wheat has led to weak seedling conditions, compounded by the winter cold wave or spring drought risks that La Niña may bring, posing challenges for the new season's bumper harvest. Main Text In December 2025, as the world welcomes the New Year, the La Niña climate has quietly completed its sixth visit—marking the fifth La Niña phenomenon established in the past six years. Although meteorological departments expect this La Niña to be weaker and shorter in duration, against the backdrop of great power competition and rising resource nationalism, weather changes are injecting more uncertainty into commodity pricing. The entanglement of the global commodity market with climate fluctuations has always been a history of the "game between nature and the industrial chain." Looking back over the past decade, each occurrence of extreme weather has influenced the commodity market through a chain of "supply disturbances - price anomalies - equilibrium reshaping." For example, the strong El Niño of 2015-2016 led to drought in Southeast Asia, reducing palm oil production and causing palm oil prices to rise by over 50%; during the La Niña cycle of 2020-2021, North American cold waves impacted shale oil production, leading to a temporary high in WTI oil prices, while frost in Brazil's main coffee-producing regions caused NYBOT futures prices to rise by over 100% for the year; the drought at the end of La Niña in 2022-2023 led to a more than 50% reduction in Argentine soybean production, pushing up the global soybean meal price center. Climate shocks are often the "gray rhinos" embedded in the global supply chain. In 2026, the narrative of climate disturbances is facing more complex changes. Since the beginning of the year, the La Niña phenomenon has become active again, and the probability of El Niño occurring in the second half of the year has risen to 60%. When "dual-peak climate" (alternating/superimposing La Niña and El Niño) coincides with a rising trend of global trade protectionism, the destructive power of weather risks may also be amplified. In recent years, the EU's Carbon Border Adjustment Mechanism (CBAM) has expanded carbon tariffs on steel and aluminum, the U.S. Critical Minerals Security Act has increased localization production requirements for key mineral resources such as lithium, cobalt, and nickel, Chile has imposed additional taxes on copper exports, and Indonesia has implemented export quotas for nickel mines. When the "uncertainty" of natural climate collides with the "rigid constraints" of human policies, the commodity market in 2026 has entered a state of "risk nesting." New Stage. Currently, against the backdrop of rising trade barriers and stricter controls in resource countries, the rapid switch in climate adds further disturbances to the supply side of commodities. This report outlines the characteristics of the La Niña climate for this winter and indicates, from the perspective of the solar cycle, that the global climate is complex and variable in the medium to long term. Under the switch between La Niña and El Niño, extreme weather risk events may occur frequently. Based on this, we focus on important sectors such as energy, non-ferrous metals, ferrous metals, and agricultural products, analyzing the paths of weather disturbances and fundamental concerns. Weather Risks: No Immediate Concerns, but Long-term Worries NOAA predicts that La Niña has steadily entered this winter, with a low probability of a double La Niña next year Sea surface temperature anomalies (SST Anomalies) are typically measured using the Oceanic Niño Index (ONI), which reflects the degree of deviation of the three-month sliding average sea temperature in the Nino 3.4 region from normal values. According to the standard, when the ONI is below -0.5°C for five consecutive months, it is determined to be a La Niña event. According to NOAA, the SST anomaly in the NINO3.4 region from September to November 2025 was -0.53°C, and in November it was -0.68°C. As of the week ending December 10, 2025, the NINO3.4 index was -0.7°C. These values indicate that cold conditions have emerged in the equatorial Pacific region, confirming that the sea surface temperature anomaly in the Pacific has reached the La Niña threshold. Although still relatively weak, it has firmly entered the La Niña climate. Based on dynamic model forecast data from 14 authoritative institutions, we see that the weak La Niña this winter may transition to neutral conditions around February to March 2026, with a low probability of a double La Niña occurring in 2026. The La Niña event has already occurred from November 2025 to March 2026. The winter La Niña significantly impacts the circulation in the mid to high latitudes of the Northern Hemisphere, often strengthening the negative phase of the Arctic Oscillation. In terms of precipitation, winter La Niña typically leads to above-average rainfall in Southeast Asia and northern Australia, while the southern United States experiences dryness and less snow. Conversely, there is above-average precipitation in western Canada, the northwestern United States, and northern Japan. The risk of drought increases in southern Brazil and northern Argentina, but precipitation may increase along the coasts of Colombia and Peru. Regarding temperature, winter La Niña tends to cause significantly lower temperatures in the central and northern parts of the North American continent, increasing heating demand, while slightly higher temperatures are observed in southern Australia and most of Southeast Asia. Chart: ONI indicator indicates that we have currently entered La Niña Source: NOAA, CICC Research Department Chart: Distribution of mainstream model predictions Note: IRI – International Research Institute for Climate and Society | December 2025 Quick Look Source: NOAA, China International Capital Corporation Research Department From the forecast data, this La Niña phenomenon has a relatively short duration and may not be accompanied by a cold winter Based on global warming and the rising average temperature, experts believe that the cooling brought by La Niña this winter is insufficient to offset the increase in average temperature [13], and may not be accompanied by a cold winter. According to NOAA's global temperature report [14], in November 2025, most regions of the world experienced abnormally high temperatures. Most of the Arctic, the land surface of the Northern Hemisphere, as well as parts of East Antarctica and Southern Africa experienced temperatures exceeding historical averages by 3.0°C. From January to November 2025, the global surface temperature was the second highest in the 176 years of record-keeping, 1.18°C higher than the 20th-century average, slightly higher than in 2023, and only second to 2024. Even in January to March 2026, according to NOAA's temperature forecast, most of North America, Northern Eurasia, Central Eurasia, the Middle East, and most of Africa and South America will show significantly above-normal temperatures. The low-temperature areas are mainly limited to western Canada, northern United States, and the Great Lakes region, with parts of Northeast China and Siberia slightly cooler than usual. In summary, due to the significantly higher global average temperature since 2025 compared to the average of the past 30 years, most meteorological agencies believe that the cooling brought by this La Niña may not be sufficient to offset the rise in global temperatures, making the probability of a cold winter this year low. In terms of precipitation, the impact of this La Niña is also different, with prominent risks of extreme weather. Regions such as the southwestern United States, southern South America, and eastern Australia are experiencing precipitation that is different from the usual winter La Niña, even completely opposite. Specifically, in November 2025, significant precipitation was observed in the southwestern United States, southern South America, Central Asia, and northern to western Australia, with precipitation amounts reaching twice the monthly average. In contrast, the eastern United States, southwestern and eastern Asia, eastern Australia, and parts of Argentina are predominantly experiencing drier-than-average climates. The subsequent development of precipitation may gradually approach typical winter La Niña patterns. According to NOAA CCSR/IRI multi-model probabilistic precipitation forecasts, from January to March 2026, there is a high likelihood of above-normal precipitation in Central America, northern South America, equatorial Africa, and oceanic continental regions, while precipitation in Mexico, the western and southern United States, around Uruguay, and northeastern China is expected to be lower. Chart: Global Precipitation Forecast for January to March 2026 Note: IRI – International Research Institute for Climate and Society | Seasonal Climate Forecasts Source: NOAA, China International Capital Corporation Research Department Chart: Global temperature forecast for January-March 2026 Note: IRI – International Research Institute for Climate and Society | Seasonal Climate Forecasts Source: NOAA, China International Capital Corporation Research Department From the perspective of the solar cycle, the probability of global weather risks may increase in the next 3-5 years Starting in 2024, the solar cycle will gradually enter a descending phase, which may intensify the frequency of transitions between El Niño and La Niña. Experts predict that the corresponding extreme weather risks may further escalate in the future [15]. Sunspots are areas on the solar photosphere that are relatively cooler due to strong magnetic field suppression, appearing as dark spots in observations. Their number directly reflects the level of solar activity—an increase in sunspots is often accompanied by more frequent flares, coronal mass ejections, and other high-energy phenomena. The activity of sunspots exhibits approximately an 11-year cyclical fluctuation, during which the number of sunspots rises from a minimum to a maximum and then falls back to a low point. Currently, we are in the descending phase of the 25th solar cycle, with observational data indicating that the peak of this cycle occurred in 2024 [16], and it is gradually transitioning to the next low point. Additionally, solar activity also has a longer cycle of about 55 years, which modulates the intensity level of each 11-year cycle. We are currently in the latter half of this long cycle, and due to the previous high activity phase occurring in the second half of the 20th century, the overall intensity of recent solar activity has been relatively moderate. Past research has found a highly statistically significant correlation between the solar activity cycle, represented by the sunspot cycle, and the transition of ENSO from El Niño to La Niña [17]. Although not every local maximum/minimum of solar activity corresponds to El Niño and La Niña, this relationship can largely explain El Niño events since 1950 [18]. Overall, the degree of abnormal weather changes during the descending phase is significantly higher than during the ascending phase. Analyzing specific cycles, the descending phase from 1969 to 1976 experienced 5 transitions with 2 El Niños and 3 La Niñas; the descending phase from 1980 to 1986 experienced 4 transitions with 2 El Niños and 2 La Niñas; the descending phase from 1990 to 1996 experienced 3 transitions with 2 El Niños and 1 La Niña; and the descending phase from 2001 to 2008 experienced 6 transitions with 3 El Niños and 3 La Niñas The downward cycle from 2013 to 2020 experienced 2 El Niño and 2 La Niña switches. Considering that La Niña and El Niño have completely opposite effects on the rainfall and temperature conditions on both sides of the Pacific, the high frequency of abnormal weather switches will relatively produce more exposure to abnormal weather risks. Chart: Sunspot Cycle Source: Royal Observatory of Belgium, China International Capital Corporation Research Department Chart: Sunspot Cycle and Abnormal Weather Source: Royal Observatory of Belgium, NOAA, China International Capital Corporation Research Department Chart: La Niña Climate Impact Range Note: Images and Media: Nina_winterandsummer_620.jpg | NOAA Climate.gov Source: NOAA, China International Capital Corporation Research Department Chart: El Niño Climate Impact Range Note: Global impacts of El Niño and La Niña | NOAA Climate.gov Source: NOAA, China International Capital Corporation Research Department From a weather outlook perspective, the probability of El Niño in the summer of 2026 is relatively high and will continue into winter Starting from July to September 2026, the risk of transitioning to El Niño should not be underestimated. According to NOAA's long-term forecast, significant warm water anomalies will appear in the tropical Pacific Ocean and may persist until the winter of 2026, or even into 2027, potentially developing into a sustained El Niño. Additionally, ECMWF indicates that existing ensemble forecasts support a rapid transition to El Niño in the summer of 2026. Based on past forecast analyses, existing models often underestimate the actual development intensity in early El Niño forecasts, and we believe it is necessary to continuously track subsequent forecast developments. From NOAA's latest forecast data, the probability of El Niño occurring in July to September 2026 has risen to around 40%. The main characteristics of summer El Niño are reflected in the continued weakening of the Walker circulation, suppressing convective development in the western Pacific. In terms of precipitation, summer El Niño typically leads to drought and reduced rainfall in areas such as Peru and Ecuador on the west coast of South America, with below-average precipitation in the southern central United States and northern Mexico; at the same time, drought conditions in Southeast Asia, Indonesia, and eastern Australia may persist or worsen In terms of temperature, summer El Niño often exacerbates heat and drought in parts of the west coast of South America, Southeast Asia, Australia, and India, increasing the risk of heatwaves; According to the latest forecast data from NOAA, the probability of El Niño occurring from November 2026 to January 2027 is approaching 60%. Winter El Niño typically causes abnormally high sea surface temperatures in the central and eastern Pacific Ocean, weakens the Walker circulation, and leads to eastward shifting of convective activity. In terms of precipitation, winter El Niño usually triggers heavy rainfall and flooding in western South American countries such as Peru and Ecuador, with above-average precipitation in East China, the southern United States, and central Argentina, while drought is likely to occur in Southeast Asia, eastern Australia, the Indian subcontinent, and southern Africa; in terms of temperature, regions in Southeast Asia, Australia, and parts of India often experience significantly higher temperatures and intensified drought, while the southern United States sees lower temperatures. Chart: The probability of El Niño significantly increases starting in the summer of 2026 Note: Seasonal Forecasts: NOAA Physical Sciences Laboratory Source: NOAA, CICC Research Department Under weather disturbances, various sectors may be "in sync" but not "in tune" Weather, as a key disturbance variable in the commodity market, causes core sectors such as energy, metals, and agricultural products to synchronously undergo supply and demand adjustments, but the influencing logic and core concerns exhibit a distinct characteristic of being "in sync" but not "in tune"—various sectors may focus on temperature fluctuations or closely monitor precipitation changes, with differing dimensions of concern and impact pathways. Energy: Temperature Dominates Peak Season Gas Demand North American Natural Gas: Peak Season Drawdown Exceeds Expectations, Maintaining Bullish Central View The performance of weather during the peak season drives significant volatility in North American gas prices. The winter of 2025/26 saw dramatic fluctuations in U.S. natural gas prices, with NYMEX gas prices briefly surging above $5 per million British thermal units for the first time since 2022, which we believe is primarily due to increased demand for heating gas. According to the EIA, U.S. natural gas consumption grew by 5.1% year-on-year in November-December last year, with the residential and commercial sectors contributing 3.9 percentage points to this growth; the HDD index for November-December was approximately 10.7% higher than the same period last year, corresponding to the high increase in heating demand. Since late December, as temperatures in the U.S. have risen, NYMEX gas prices have significantly retreated to around $3.5 per million British thermal units. The peak season demand correction of high inventories maintains the judgment of an upward shift in the volatility range of U.S. gas prices in 2026. According to the EIA, as of early 2026, U.S. natural gas inventories have been revised down to about 1.2% below the five-year average, lower than the 4.5% before the heating season began, with peak season inventory consumption exceeding seasonal norms, potentially providing a good starting condition for an upward shift in off-season price central. Meanwhile, U.S. LNG exports are still expected to expand. According to the EIA, LNG exports in 2025 have increased by approximately 22% year-on-year, and with the expected commissioning of Golden Pass, we anticipate a further 20% expansion in exports in 2026 Based on the above, we maintain the judgment that the fundamentals of U.S. natural gas will be tight in 2026, expecting the NYMEX gas price seasonal fluctuation range to rise to $4-5 per million British thermal units. Chart: U.S. natural gas consumption in winter increases year-on-year Source: EIA, CICC Research Department Chart: U.S. natural gas de-stocking in winter exceeds seasonal norms Source: EIA, CICC Research Department European Natural Gas: Mild Winter Does Not Change Low Inventory, LNG Imports May Increase in Volume but Decrease in Price The mild winter has not changed the low inventory pattern, and LNG imports in the 2026 off-season may increase in volume but decrease in price. This winter, temperatures in Europe are higher, with the average temperature in major European countries in November-December about 6% higher than the same period last year. The natural gas consumption data we monitor for 11 European countries shows a year-on-year decrease of about 7%. However, it appears that the mild winter has not substantially changed the low state of European natural gas inventories; as of January 7, European natural gas inventories are about 19% lower than the five-year average for the same period, marking a low since the Russia-Ukraine conflict in 2022. We believe that Europe is likely to start the 2026 off-season replenishment with a low inventory baseline, which may further increase the demand for LNG, especially U.S. LNG imports, providing demand support for the increase in U.S. LNG exports. Against the backdrop of a significant increase in global LNG supply, we maintain the trend judgment of a downward shift in European gas price centers, expecting the Dutch TTF gas price center to decline to $9-10 per million British thermal units in the 2026 off-season. Chart: This winter, temperatures in Europe are higher, and heating gas demand is weak Source: Bloomberg, CICC Research Department Chart: European natural gas inventories remain low Source: Bloomberg, CICC Research Department Chart: This year, Europe may still need to increase LNG imports for replenishment Source: Bloomberg, CICC Research Department Chart: Break-even gas prices for major new LNG projects Source: Bloomberg, China International Capital Corporation Research Department Oil: Focus on Disruption Risks from North American Hurricane Season The impact of North American summer hurricane risks on the oil market is mainly concentrated in the Gulf of Mexico, which may not only directly lead to the evacuation and shutdown of offshore drilling platforms but also force coastal refineries to close or reduce their loads. Historically, significant hurricane disruptions tend to occur during periods when climate conditions switch between neutral and La Niña, such as in 2005, 2008, and 2020, when summer hurricanes caused interruptions in U.S. oil and gas production and refinery operations, bringing short-term upside risks to crude oil and refined product prices. Chart: Historical Review of North American Hurricanes' Impact on Oil Supply Source: EIA, Bloomberg, China International Capital Corporation Research Department Non-ferrous Metals: Heavy Rainfall May Increase Mining Disruption Rates In the non-ferrous metals sector, we suggest focusing on the increased mining disruption rates caused by heavy rainfall. In particular, the risk of mining interruptions due to landslides and flash floods in Indonesia's copper, nickel, and bauxite mines, as well as reduced output from Chile's salt lakes due to heavy rainfall diluting brine concentration. Moreover, as high-quality shallow resources are depleted, new projects are being developed at greater depths, often in areas with underdeveloped infrastructure, which will lead to a decreased ability of mines to cope with extreme weather risks. Under similar intensity, future La Niña/El Niño events may have a more significant impact on mining production safety and efficiency. Heavy rainfall is one of the key factors triggering geological disasters in mines. As the proportion of "open-pit to underground" projects increases, mines may become more vulnerable to heavy rainfall. Water infiltration will reduce the shear strength of rock masses, making open-pit mines prone to slope failures and even large-scale landslides, which will interrupt transportation in the mining area, bury operational surfaces, and cause production stoppages. For underground mines, heavy rainfall can affect groundwater levels and exacerbate the risk of water inflow into the mine. As shallow and easily mined resources become increasingly depleted, miners are turning to the continuous development of deep resources in existing mines, with many open-pit deposits transitioning to underground mining. The caving method, which can achieve economic benefits comparable to open-pit mining, is widely used, but it comes at the cost of making the geological structure of the mine more fragile and increasing disaster risks. For example, the Grasberg mine in Indonesia has seen 52% of surface runoff directly enter the block caving mining area due to surface subsidence [19]. In September 2025, heavy rainfall, insufficient drainage, and inadequate slope monitoring led to a landslide accident [20], and in 2026, Grasberg lowered its production guidance by 270,000 tons. We recommend closely monitoring extreme weather conditions in Indonesia this year and their impact on copper, nickel, and bauxite mining Drought conditions in some regions will limit power supply and affect mining output. While extreme precipitation is a major threat to safe mining operations, on the one hand, mining production also relies on abundant water resources. The La Niña events from 2020 to 2023 led to droughts in South America, during which Chile's copper mine annual output decreased by 8.4% [21]; in recent years, many new mining projects are located in underdeveloped infrastructure areas, where local electricity coverage is low and heavily reliant on self-built power stations, especially hydropower units. Drought conditions will drive up energy costs, limit power supply, and constrain capacity release, particularly for mines involving supporting electrolytic process smelting plants. For instance, the drought in Zambia in March 2024 led to a national power shortage, causing the Chambishi copper smelter to cut its output by one-fifth [22]. Historically, climate disturbances have raised mining costs across various stages On the production side, heavy rainfall leads to water accumulation in pits, restricting operational efficiency and increasing the risk of equipment sinking and bucket adhesion in clay-rich rock layers, resulting in higher equipment maintenance costs; on the transportation side, rainfall causes muddy roads in mining areas and increases the moisture content of ore, raising land transportation costs. For barge port transportation, it also affects loading and shipping efficiency. For example, during the rainy season in Guinea, transportation restrictions typically lead to a more than 25% decline in bauxite shipments. Additionally, extreme rainfall has repeatedly triggered tailings dam failures, increasing disaster prevention and compliance costs. In February 2025, Chambishi in Zambia faced production stoppage and an 80 billion lawsuit due to a tailings dam failure caused by continuous heavy rainfall [23]. The cumulative cost pressures across these stages will elevate the overall cost curve and weaken supply stability. Heavy rainfall may dilute the concentration of brine in salt lakes, affecting output, but the promotion of new technologies such as DLE (Direct Lithium Extraction) may help salt lake production mitigate climate impacts. South American salt lakes are mainly concentrated in the "Lithium Triangle" region (northern Chile, western Bolivia, and northern Argentina). Due to their high grade and low magnesium-to-lithium ratio, lithium is primarily extracted using traditional salt flat methods. However, precipitation can dilute the concentration of brine in salt lakes, reducing output efficiency. For example, in 2013 [24] and 2015 [25], South American salt lakes experienced frequent heavy rains due to El Niño, leading to year-on-year declines in lithium production in Chile of 15.2% and 7.8%, respectively. We expect that the rainfall caused by this La Niña may also slightly disrupt the output of South American salt lakes. However, considering that more producers are adopting climate-independent and more efficient DLE technology, such as SQM, which has already implemented this technology in the Atacama salt lake, we anticipate that the sensitivity of South American salt lake output to climate will gradually diminish. La Niña may influence aluminum prices through electricity costs. Generally, during the winter (December to February) of La Niña development years, precipitation in the upper reaches of the Yangtze River and Yunnan in China is often insufficient, leading to a reduction in hydropower generation and an increase in local hydropower aluminum costs. In the Northern Hemisphere, it may exacerbate cold winter weather, increasing energy consumption, driving up electricity and gas prices, and also pushing up the cost of electrolytic aluminum in Europe. Chart: Chilean Copper Mine Output Source: USGS, CICC Research Department Chart: Proportion of Hydropower in Total Power Generation in Some Mining Countries Source: World Bank, CICC Research Department Chart: Guinea Bauxite Export Volume Source: Mysteel, CICC Research Department Chart: Chile Lithium Production Source: USGS, CICC Research Department Black Series: A Mild Winter May Weigh on Coal Prices, Brazilian Mine Supply Conditions are Good The impact of La Niña on the black series will affect both supply and demand. From the demand side, this winter's warmer domestic temperatures may suppress coal consumption elasticity through heating demand. Since November, thermal coal prices have been declining, which is not unrelated to the weak output of thermal power during the heating season, with the latest weekly power generation (mid-December) showing a year-on-year decline in thermal power generation expanding to 2.4%. Historically, electricity consumption in winter and summer has shown a strong correlation with temperature conditions, and we believe that thermal coal consumption and coal prices may struggle to find performance opportunities this winter. Additionally, we suggest paying attention to the potential shift from La Niña to El Niño this summer, as increased precipitation in the Yangtze River Basin will benefit hydropower output, thereby dragging down thermal power and coal consumption. As we expressed in the 2026 coal outlook, during the "14th Five-Year Plan" period, coal power will enter a "peak zone." With the continuous increase in the stock base of new energy, the annual increase in electricity consumption is basically offset by the growth of non-coal thermal power such as wind, solar, hydropower, and natural gas, leaving little room for growth in coal power. We expect that coal power output may show a slow decline but with occasional rebounds. The elasticity of coal power may come more from fluctuations in electricity consumption and wind, solar, and hydropower output due to uncertain weather conditions. Therefore, if the climate is relatively mild and water supply is sufficient, it may reduce the elasticity of coal power output, and coal prices may lack a "weather premium." Chart: Year-on-Year Growth Rate of Weekly Power Generation Source: CCTD, CICC Research Department Chart: Brazilian Iron Ore Shipment Situation Data Source: Refinitiv, China International Capital Corporation Research Department From the supply side, we recommend paying attention to coal production in Northern Australia and increased iron ore production in Brazil. Firstly, the above-average rainfall in Northeast Australia may have some impact on Australian coal exports, further supporting the tight balance in the seaborne coking coal market. Additionally, due to the rainy season, the first quarter is traditionally a low season for iron ore shipments from Brazil. We have observed that La Niña may lead to flooding in the north and drought in the south of Brazil. For Vale, one of the four major miners, its southern mining area may maintain relatively good production conditions in a drier environment, thus La Niña may, to some extent, alleviate the impact of the rainy season on production and shipments in the southern mining area. Historically, the iron ore mining areas in southern Brazil have been more vulnerable to rainfall due to weaker infrastructure, smaller and more dispersed mines, and a higher proportion of road transport (for example, its two major dam collapse incidents—Brumadinho in 2019 and Samarco in 2015 both occurred in the south). Although rainfall has increased in the northern mining areas, the high proportion of railway transport makes the impact on production more controllable. Therefore, with the trend of capacity release in Brazil in recent years, we expect that iron ore shipments from Brazil in the first quarter will maintain a good momentum, with Vale expected to see an increase of about 8 million tons in iron ore for the whole year. Agricultural Products: Weather Impact Varies by Crop Soybeans: South American soybeans enter harvest season, La Niña may not change high yield expectations La Niña has limited impact on South American yields, reinforcing high yield expectations. In November 2025, Brazil's soybean planting for the new season will begin. Due to the return of La Niña in winter, there are some concerns in the market regarding South American soybean production, especially against the backdrop of slow soybean purchases from China. As of mid-January 2026, Brazil's new season soybean planting is basically complete (as of January 10, the planting rate for Brazil's 2025/26 soybean season is 98.2%), and early-planted soybeans have entered the harvest season. Overall, although Brazil's soybean planting and growth have been affected by La Niña with periodic drought disturbances, the overall growing season's water and heat conditions are good due to the relatively weak intensity of La Niña this season, combined with a significant increase in planting area, the high yield expectations in South America remain. Currently, various institutions maintain their record high yield forecasts for Brazilian soybeans. The USDA's January forecast estimates that Brazil's soybean production for the 2025/26 season will reach 178 million tons, potentially increasing by another 4% from last year's high base. Consulting agency AgRural estimates that Brazil's soybean production for the 2025/26 season may exceed 180 million tons, an increase of 5.19% from the previous year. As the weather impact weakens and high yield expectations in South America persist, competition in the global soybean market may intensify. In the United States, the trade relationship between China and the U.S. has somewhat eased in November 2025. According to USDA weekly data, China is steadily purchasing U.S. soybeans, alleviating some market concerns regarding demand for U.S. soybeans. As of early January 2026, U.S. soybean exports to China (including unshipped) have reached 6.89 million tons this season, but still lag behind normal years In Brazil, the USDA raised the soybean production forecast for the 2025/26 season to 178 million tons in January (up 3.8% year-on-year), setting a new historical high. The new season soybeans will enter a concentrated listing period from February to April, with exports expected to reach 114 million tons (up 1.3% year-on-year), which may further consolidate Brazil's dominant position in exports to China. The global soybean trade pattern of "Brazil dominating, U.S. soybeans under pressure" is becoming increasingly clear. In terms of prices, we maintain the U.S. soybean price range of 1000-1150 cents/bushel. In the short term, during the concentrated listing period of new Brazilian soybeans (March to May), U.S. soybean prices may approach the lower end of the range at 1000 cents/bushel; in the medium term, with weather speculation during the U.S. soybean planting season, prices may rebound slightly but are unlikely to break the upper limit of 1150 cents/bushel. Key points to watch: 1) Brazilian soybean premiums rise beyond expectations; 2) Brazilian transportation bottlenecks worsen; 3) Although the impact of weak La Niña is limited, if there is sustained drought during the flowering to filling period in southern Brazil (December to February) and during the filling to maturity period in Argentina (January to March), high yield expectations may be revised down; 4) The implementation of bioenergy policies in the U.S. and Brazil. Chart: Brazilian Soybean Production and Export Situation Source: USDA, CICC Research Department Chart: Argentine Soybean Production and Export Situation Source: USDA, CICC Research Department Palm Oil: Weak La Niña May Have Little Impact on Palm Production, Maintaining Short-Term Bullish Judgment This winter's weak La Niña has a weaker overall impact on precipitation in Southeast Asia compared to previous years, which may have little effect on palm production. After December 2025, the weather conditions in the main producing areas have significantly improved compared to the heavy rainfall period in November. In Malaysia, the northern peninsula has become noticeably drier, allowing field operations to proceed normally; although some areas in the south and Sarawak remain relatively wet, affecting harvesting and transportation to some extent, the impact is relatively minor. In Indonesia, despite some areas in Sumatra continuing to experience heavy rainfall in December, IPOSS still maintains its production forecast for the 2025/26 season at 49.8 million tons. This indicates that the market believes regional weather disturbances are still within a controllable range and have not shaken the overall production foundation. Based on the above analysis, we believe that compared to weather, the palm oil market in the first half of 2026 may be in a critical period where high inventory realities and potential demand variables interact. Trading will revolve around core factors such as supply pressure, demand increments, and long-term policy variable disturbances. 1) Malaysian inventories have accumulated to a five-year high, but as the production reduction season arrives, supply pressure may be fully priced in. 2) Marginal improvements on the demand side may be the market's trading focus. On one hand, traditional stocking demand before the Muslim Ramadan and India's edible oil replenishment needs provide bottom support for prices On the other hand, Indonesia's biodiesel consumption remains high [27], coupled with the suppression of supply potential due to Indonesia's plantation nationalization policy [28]. We believe that the fundamentals of palm oil in the main producing country, Indonesia, may be structurally strong in the medium to long term. In summary, the palm oil market in the first half of 2026 will mainly face a game between "weak reality" (high inventory) and "strong expectations" (strong demand), with prices likely to maintain a strong oscillation pattern within a range. In the medium to long term, the winter El Niño of 2026 may further impact palm oil production in 2027. According to the latest forecast from NOAA, the probability of El Niño remains high from November 2026 to January 2027. Historically, the El Niño phenomenon has significantly suppressed palm oil yields. Since 1970, after four strong El Niño events, the average yield of oil palm fruit in Malaysia has significantly decreased by 12%, 24%, 14%, and 15%, respectively. If the El Niño lasts for a longer period, the impact will be more profound; for example, the strong event from 1991-92 lasted 14 months and led to a 15% drop in yield, creating a ten-year low. According to our calculations, this impact has a lag of about 10 months, related to the sensitivity of oil palm flower sex differentiation to moisture: drought tends to increase male flowers and decrease female flowers, thereby reducing the fruiting rate. The current high correlation between the ONI index and yield data suggests that the output of major producing countries in the 2027 bumper harvest season may be lower than expected due to climate lag effects. In addition, issues such as the aging of palm trees in Indonesia and the plantation nationalization policy are also suppressing the release of palm oil production on the supply side. We expect that the international palm oil supply-side narrative may provide solid support for prices in the medium to long term. Chart: The impact of El Niño on palm oil yield Source: Malaysian Palm Oil Board, NOAA, CICC Research Department Chart: Comparison of palm oil yield and El Niño Source: Malaysian Palm Oil Board, NOAA, CICC Research Department Wheat: Delayed sowing of winter wheat, new wheat bumper harvest faces challenges The sowing period for winter wheat has been delayed this winter, and the wheat seedlings are relatively weak. From a temporal and spatial distribution perspective, the phenomenon of late sowing is widespread. In the main producing areas of the North Yellow River and Huaihai regions, which account for over 80% of the national output, the sowing operations have generally been delayed by 10 to 30 days compared to the best farming time in previous years due to continuous rain during the harvest period of preceding autumn crops. This has resulted in the time for winter wheat in southern North China and central-northern Henan entering the overwintering period being delayed by 5 to 20 days. The direct consequence of late sowing is a severe shortage of accumulated temperature before winter. According to estimates from the Central Meteorological Observatory, the effective accumulated temperature in wheat fields in key provinces such as Shaanxi, Shanxi, Hebei, Shandong, and Henan is generally less than 400℃·d before overwintering, which is 150-230℃·d lower than the average level of the past ten years [29] This is far from reaching the thermal conditions required to form strong seedlings before winter (usually needing accumulated temperature above 500-600℃·d), resulting in a large area of wheat seedlings remaining in a weak state as winter approaches, with the seedling condition significantly worse than in previous years. The climate uncertainty brought by La Niña this winter may exacerbate the challenges of a bumper harvest for new wheat. On one hand, La Niña increases the probability of strong cold waves, rain, snow, and freezing during winter. The weak seedlings caused by late sowing have shallow root systems, fewer tillers, and insufficient organic nutrient reserves, making their cold resistance far lower than that of strong seedlings. According to meteorological monitoring by the Central Meteorological Administration, there is already a downward trend in soil moisture in some wheat areas such as eastern and southern Henan, southwestern Shandong, and northern Jiangsu and Anhui [30]. If the winter or early spring encounters a phase of strong cooling or "late spring cold," it may directly lead to a decrease in the number of ears per mu. On the other hand, La Niña may bring about phase droughts, increasing the difficulty of precise field management. According to NOAA's forecast, from January to March, the production areas in the middle and lower reaches of the Yangtze River in China will face relatively less rainfall, which may have a certain impact on the effective tillering and final number of ears per mu of winter wheat from greening to jointing stage. In summary, this season's wheat production can be described as "an unfavorable start," and further attention is needed on the meteorological changes from January to March, tracking the transformation of winter wheat seedlings and the situation of spring irrigation and topdressing. In addition, we remind that the expectation of reduced production may drive up prices during the new wheat listing period in April-May this year, which may resonate and push up domestic corn prices. Risk Warning and Disclaimer The market has risks, and investment should be cautious. 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