The 2010-2011 La Nina has played havoc with historical rain patterns around the world. The Pacific North West has experienced a significant increase in their already heavy rain patterns, with as much as 100 inches of rain or more falling in 2010 and 2011 seasons.
Australia was inundated by rain in November ~ January, causing their open pit coal mines to flood. This meant the pits needed to be drained and reconditioned before being put back into production.
China found its supply of high grade coal from Australia delayed, causing a ripple in their energy supply expectations. China relies on Australian coal to sweeten their own domestic coal consumed at power plants.
China generates about 20% of their electricity capacity from hydroelectric dams. The drought has impacted the shipping on the Yangtze River in places. Currently, hydro electric generation is down by 20% or the equivalent production of the 3 Gorges Dam.
China has banned the exports of Diesel, as it scrambles to find alternative sources of fuel for its economy. While the supply gap is equal to about 3% of the nation’s electrical supply, it is centralized in the Shanghai area. This is the heart of Chinese manufacturing & shipping.
The lack of electricity will have production and export implications for the majority of the Asian economies this summer, as Japan has its own electrical short fall issues. These combined events will slow down any chances of actual organic GDP growth in region, which is not factored into the global markets yet in my opinion.
When the market starts to price this in, is anyone guess. When you consider that Asia will be electricity constrained, and Europe will be capital constrained, the US economy is starting to look like the best, of the worse.
I would keep an eye on $FXY, $FXE, $FXC with $UUP being the obvious area of strength. Just like La Nina and El Nino, the economic weather patterns are changing.