Profiting from possible El Niño - Stocks affected

[RichKid]

I've been reading and hearing about the possibility of an El Niño related drought reoccurring. Does anyone have any opinions on which stocks will be affected and how? (ie some benefit others don't).
I'd say that some of the agricultural companies will but to what extend is another question. Production may fall but prices may go up disproportionately.

Thought it'll be good to prepare for any buy or sell opportunities ahead of the general market.

In commodities markets El Niño is a big deal (eg Soy beans) but is less watched in the general stock markets. I'm looking for tangible, proven relationships that people may have observed during the last El nino cycle between certain stocks and the onset of certain weather conditions.

 

[Smurf1976]

Re: Profiting from possible El Nino- Stocks affected

This is not quite what you were after, but a possibility for the future.

Sydney's water storages are presently a bit over 40% full. Since the total storage capacity is equal to about 3 years of average consumption / inflows it's not going to be anywhere near full at the start of next Summer in the absence of a flood. But with severe drought a full crisis could foreseeably develop within 12 months.

The immediate opportunity resulting from this is domestic water tanks, conservation devices, drip watering systems (for use with the tanks since use from the mains would presumably be banned) etc. Also commercial car washes that recycle water would benefit from bans on washing cars at home.

There would seem to be a possibility that the NSW government would develop a new water source, such as desalination or some new water scheme involving dams, pipelines etc if the drought results in a real water shortage in metropolitan Sydney.

It's probably a bit early to invest in anything on that basis but be aware that there could be an opportunity coming. And of course if Sydney builds a desalination plant then Melbourne will probably want one too...

Political considerations are such that any desalination plant would quite possibly be powered by 100% renewable energy (on a net basis - still connected to the grid) which creates another opportunity. Desalination plants are large electricity users.

All just possibilities at this stage though.

 

[Investor]

Re: Profiting from possible El Nino- Stocks affected

I've been reading and hearing about the possibility of an El Niño related drought reoccurring. Does anyone have any opinions on which stocks will be affected and how? ....

Current issue of BRW on page 42 has some coverage "A Dry Argument" that yet another drought will hit. What a pity. Australia (a dry continent) could do without this.

Share price of Futuris (FCL) could fall. I do not hold. Do not like exposure to the vagaries of weather.

 

[salz]

Re: Profiting from possible El Nino- Stocks affected

Yeah... The El Niño will create a serious impact throughout the region, dampen the economies... Thailand are facing drought which will cut this year output of agricultural harvest. Thailand and Vietnam, theworld's largest and second largest nations of rice exporter will have a drop in rice harvest. This will dampens their economies as they are still largely agricultural countries.
Malaysia is also facing a drop in water levels throughout the peninsular, especiallly severe around the highly populated Klang region which include the capital(Kuala Lumpur) and neighbouring cities, Petaling Jaya, Port Klang etc..
India might not be spared either...

 

[skin]

Re: Profiting from possible El Nino- Stocks affected

T
There would seem to be a possibility that the NSW government would develop a new water source, such as desalination or some new water scheme involving dams, pipelines etc if the drought results in a real water shortage in metropolitan Sydney.

It's probably a bit early to invest in anything on that basis but be aware that there could be an opportunity coming. And of course if Sydney builds a desalination plant then Melbourne will probably want one too...

Multiplex MXG have been awarded Joint Venture agreement to build a desalination plant in Perth. This company is on a low share price and is a diversified company. Trying "desalination" you wouldn't think will harm its price too much however it will gain invaluable experience for australia's dry conditions.

 

[Smurf1976]

Re: Profiting from possible El Nino- Stocks affected

A bit off topic, but anyone know what the cost of water from these desalination plants is?

 

[Investor]

Re: Profiting from possible El Nino- Stocks affected

I saw a documentary on this issue on TV about the proposed plant in Perth, including the small prototype in Rottnest Island (off Perth).

From memory (I could be wrong), there is a huge question mark over the viability of such a project.

From my general reading, I believe (I could be totally wrong) that the costs are so high as to render such an experimental project unviable. However, once it is built, taxpayers in WA will have to pay whether it is viable or not. All residents in Perth should prepare for rising water rates, just in case.

However, I have read that water shortages are going to be such a big problem in Sydney and Gold Coast in a few years that unless some new supply (in whatever form) and big (eg new reservoirs) is done, people better get use to living with water shortages.

Time will tell.

 

[clowboy]

Re: Profiting from possible El Nino- Stocks affected

Live in perth......

From memory I think it's like $1.60 per ???L
Roughly I think it is meant to cost around four times that of normal water.
Also it creates huge issues in terms of greenhouse emissions.

On the up side they are in the process of having it powered by wind farms (reducing emmisions).

They where talking about a "tax" of $50 being tacked onto each water (rates) bill to fund it, something like 350 mill to build and 20 million a year to run but dont quote me on the figures exactly.

 

[Smurf1976]

Re: Profiting from possible El Nino- Stocks affected

Live in perth......

From memory I think it's like $1.60 per ???L

The units would be KL (kiloliters) I assume since that's the standard units that the water industry uses in terms of urban reticulation. ML (megalitres) are normally used for bulk supply like this but $1.60 sounds far too cheap for that. But $1.60 / KL is pretty expensive for bulk water...

For background info, Sydney uses somewhere in the order of 1500 megaliters a day (that's a very approximate figure +/- 30%) if that gives any "feel" for the scale of this.

Hobart uses 100 ML but has 9000 ML coming down the River Derwent every day (hence no meters and no shortage although some try to create the impression of shortage for various political purposes). Melbourne consumption is similar to Sydney and it's fairly scarce there too. Brisbane has plenty from Wivenhoe dam and in Adelaide the problem is quality more than quantity (though quantity isn't unlimited). Gold Coast is building (has built?) a pipeline from Brisbane.

So, potential for desalination or other water development in Sydney, Melbourne, Adelaide, Perth. Now that Perth is a goer and Sydney is looking at it, it's only a matter of time before Melbourne and possibly Adelaide do likewise IMHO.

A drought might prompt some action from the relevant governments? Investment opportunity not just building the plants but wind power too given the greenhouse issue and the politics of it all.

 

[son of baglimit]

Re: Profiting from possible El Nino- Stocks affected

And all of these arguments, comments, suggestions etc end up bringing up the age old theory (recently raised by the libs in w.a.) of turning water around from the 'top end' and sending it back south. for those old enough to remember, gough looked into it in the 70's but didnt stay long enough to look properly. yes it would cost billions, yes it is a massive infrastructure project, but a very serious feasability study has to be considered. it doesnt solve all the issues, but in these times of serious drought, pipelines feeding back from several points along the northern coast during summer would be suitable to water the major agriculture areas of southern nsw, victoria & south aust, the cattle & sheep country in outback nsw & qld, and of course supplies to major provincial & metro areas along the eastern & southern coasts, by feeding it directly into existing dams. (i'm sorry w.a. folk, but i dont know enough about what you get up to over there, other than dig big holes)
calculate the costs associated with this single multi faceted project versus single, purpose built, state govt run desalination, river conservation and dam building schemes being considered elsewhere.
LET THE ARGUMENTS BEGIN.