Tonga Valcano Eruption: the Effect to Airlines, Cruise and Agricultural

Tonga has always been a country prone to earthquakes and volcanoes. Due to its special geographical location, it happens to be located on the "convergent plate boundary" between the Pacific plate and the Indo-Australian plate. It is also the most active volcanic and seismically active Pacific Rim arc on the earth.

Volcanic eruption on H8 satellite image Source: tropicaltidibits

According to estimates from the Weathermodels, the height of the volcanic eruption is at least 25 kilometers. 

Volcanic eruptions produce large amounts of volcanic ash. Volcanic ash is a large mass of crackling lightning, which itself can absorb radio signals, interfere and absorb. 

The Effect on Market

Airlines and Cruise 

Most of the areas where tsunami warnings are maintained are mainly based on agriculture, fishing, tourism and mining. Australia, New Zealand and other countries play a pivotal role in the global supply chain of agricultural products such as dairy products, fresh vegetables and fruits, which are vulnerable to the secondary impact of another volcanic eruption. If the volcanic eruption continues, the acceleration of global climate change may increase the pressure on the new energy supply. If the volcanic ash spreads over a large area, it may further affect the global aviation industry, reduce transportation efficiency and drag down the global supply chain.

Tonga volcanic eruption is likely to cause natural disasters in the short term, which affect airlines and cruise. For example:

• Earthquake
• Tsunami
• Cloud map
• Air pressure
• Volcanic ash
• Stratosphere

Agricultural Reduction

Global cooling and volcanic ash erosion caused by volcanic eruptions could reduce regional crop yields. Historically, the largest eruption of Mount Tambora in Indonesia in 1815 made 1816 a "year without summer". Insufficient accumulated temperature in the main crop producing areas in summer led to "grain shortages" in Europe and the United States. Volcanic eruptions may cause global cooling, and the northern hemisphere will be affected by the La Niña phenomenon this year. If the accumulated temperature is insufficient, the yield of spring crops and fresh fruits and vegetables may decrease. In addition, corrosive volcanic ash could also have a significant impact on agriculture: according to the Geological Society of London, 1 cm of volcanic ash is enough to completely destroy crops. New Zealand as a major global agricultural exporter closer to Tonga will be directly affected.

$Teucrium Corn Fund(CORN)$ $Soybeans - main 2203(ZSmain)$

Energy and Transportation

Except for the impact on agricultural production, it is also necessary to pay attention to whether the volcanic eruption will have an impact on the production and transportation of iron ore. In the short term, the tsunami triggered by the volcanic eruption may affect market sentiment. Iron ore, aluminum ore, and nickel ore produced in the southern hemisphere play an important role in the global trading system.

$Legacy Iron Ore Ltd(LCY.AU)$$ALUMINUM FUTURES - main 2202(ALImain)$$Nickel Mines(NIC.AU)$

Researcher says

If extreme weather disasters occur frequently around the world in 2022, the gap between agriculture and the power supply may exceed market expectations, and the economy may stay in stagflation for longer than market expectations. Considering the hedging allocation of potential climate change + the domestic policy premium of primary product supply guarantee, sectors such as agriculture, coal, oil, and nuclear power still need to pay attention.

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