El Niño and diesel refocus attention on supply risks; Copper faces a triple threat

While El Niño-driven supply disruption in nickel is grabbing headlines, J.P. Morgan's focus remains primarily fixed on copper, which faces a triple threat of supply-side risks: diesel availability in South America, El Niño weather risks and Chilean strike potential. The US supplies more than 70% of Chile's diesel demand and ~50-60% of Peru's, creating significant risk around a potential US export ban; a sharp, sudden wave of diesel-driven mine curtailments probably isn't likely right away given inventory buffers and mitigating operational actions, but diesel shortages in Latin America now would likely reverberate and weigh on copper production in the quarters ahead, reinforcing a higher-for-longer copper price environment. For copper, the most acute El Niño supply risks center around drier weather in South East Asia and Zambia and wetter weather in Chile and Peru, with the ~100 kt/y Ok Tedi mine in Papua New Guinea at risk;