Busy Pre-Christmas shopping is followed by fallow holiday period

January 1, 2017 by Harry Horner

(CaliforniaCarbon.info, Jan 2, 2017) The run-up to Christmas was a surprisingly busy period on the secondary market for CCA’s, the total traded volume for the week starting on the 19th summed to 7,726,000. However, as expected, the week sandwiched by Christmas and New Year was suitably quiet with just 580,000 in volume passing through the market.

The ‘new current vintage’, i.e. V2017, picked up the largest share of trading over the fortnight with 55% of the volume, the old current of V2016 had 39%, the 6% remainder was for V2015. By delivery date, 48% of trading was on the old front and benchmark of December 2016, whilst the new benchmark V2017 was just behind with 37%. The advance months of January and February shared the leftover 1,230,000 of volume.

The first week of the fortnight saw a net increase of 1,348,000 in open interest for the market. Yet the growth primarily on the front was constrained by the liquidation of 1,060,000 V2017, December 17 contracts. This liquation could well represent the successful exit from a long position contracted when the market was pitched more than half a cent beneath its current level earlier this year. The second week of the fortnight saw a very marginal increase of just 10,000 contracts.

Prices stepped up by $0.07 over the fortnight, and thus the front price finished 2016 at $12.94. This is a full $0.63 beneath the auction reserve for 2017, and $0.26 beneath the December price given when the market first opened in January 2016. The current market price for December 2017 is pitched at $13.25. Political developments aside, this is likely to rise nearer to the new floor, as the effect of withheld volume at auction begins to bite.

Harry Horner – (harry@californiacarbon.info)

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