Key Takeaways:
A Barclays report dated May 15 warns that a potential “Super El Niño” emerging in the summer of 2026 threatens to severely disrupt global commodity supplies, creating a risk of a widespread inflationary shock. The bank’s analysis indicates a tail-risk scenario where the event’s intensity could rival the 2015-16 cycle, which wiped an estimated $3.9 trillion from the global economy over five years.
“Climate forecasts increasingly point to a significant El Niño event around mid-summer 2026,” Craig Rye and the cross-asset research team at Barclays said in the report. While the base case is a moderate-to-strong event, the report highlights that some models show a path toward a “super” event comparable to 2015-16, creating a more severe risk profile for markets.
The primary transmission mechanism is a reshuffling of global rainfall, leading to drought in some regions and flooding in others. The report identifies the most immediate pressure points in agricultural commodities like cocoa, palm oil, and sugar. During the 2015-16 event, West African cocoa production was hit by altered rainfall patterns, contributing to supply shortages.
Unlike the 2015-16 event, which occurred when many commodity markets were oversupplied, a new super El Niño would hit markets like copper that are already facing structural deficits. Barclays estimates the global copper market could have a 300,000 to 400,000-tonne deficit in 2026, making any supply disruption more impactful on prices.
The report flags a significant risk to copper production centered in Northern Chile, a region that accounts for approximately 4.2 million tonnes of annual output, or 17% of global supply. During a strong El Niño, this arid region is vulnerable to extreme rainfall and flooding. In March 2015, similar floods caused multiple mines, including Antofagasta’s Centinela and Candelaria, to temporarily shut down, removing an estimated 90,000 tonnes of copper from the market. While that represented only 0.5% of global supply, a similar disruption in a deficit market could have a much larger price effect. The highest risk window for flooding in the Atacama region is between February and April 2027 if the El Niño peaks late in 2026.
In China, El Niño patterns are linked to weaker summer monsoon rains, which poses a direct threat to hydropower-dependent aluminum smelters in Yunnan province. The region accounts for about 6.6 million tonnes of production, or 9% of the global total, and relies on hydropower for 60-70% of its electricity. Drought conditions in 2023-24 forced capacity cuts of 1.15 million tonnes. Barclays projects that a repeat of a 20% production curtailment would put 1.3 million tonnes of aluminum output at risk, equivalent to 1.7% of global supply. This comes as the market is already tight due to production cuts in the Middle East.
The report also details risks for soft commodities. West Africa, which supplies 60-75% of the world’s cocoa, faces renewed weather volatility. After prices spiked to over $10,000 per tonne in 2024 due to poor harvests, a 2026 weather disruption could halt the market’s recovery and again pressure food companies like Barry Callebaut and AAK. For palm oil, El Niño typically brings drier conditions to key growing regions in Indonesia and Malaysia, reducing fruit yields. This weather risk is compounded by rising demand for palm oil as a biofuel feedstock, further squeezing supply available for food and industrial use.
This article is for informational purposes only and does not constitute investment advice.
