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Market shows signs of stability as participants gather in SF

April 24, 2017 by Ronjoy Bezbarua

CaliforniaCarbon.info, April 24, 2017:

CCA prices maintained a positive trend for the second week since California’s appeals court voted in favour of the program earlier this month. Prices opened the week at USD 14.04, down USD 0.11 on the previous week’s close. The dip in price was likely a reaction to Friday’s news that The Pacific Legal Foundation intend on appealing the CalChambers case to the Supreme Court. Prices climbed throughout the week however, reclaiming a midweek of price USD 14.16 and closing at USD 14.14.

With many market participants in San Francisco for the NACW event held last Thursday and Friday, trading was concentrated around the week’s frontend. In total 2,694,000 tons changed hands, a decline of 22.5% on the previous week’s volume. The contribution for the current vintage-V2017 to trading increased to 93.5% from the previous week’s 90% although absolute volume decreased by 622,000 tons. Trading for the V2016 vintage, however, displayed a positive trend and increased by 186% from 35,000 tons to 100,000 tons. Similarly, trading resumed for the V2019 front at 75,000 tons after an absence of trading for the week before. Conversely, the V2018 front saw an absence of any trade despite being the second largest contributor the week before with 300,000 tons traded for that period.

In terms of delivery, the contracts were spread between the current front (Apr 17), the Jun 17 delivery and current Dec 17 benchmark with a 22.8%, 10.54% and 66.48% respective share of the total volume traded. This indicates an increase in contribution by 5.4% and 3% to the overall volume for the current front and the June 2017 front, respectively, as compared to the previous week. Contribution from the current benchmark decreased by 7%.

Open interest creation continued to improve significantly with a net change of 853,000 contracts (a 1.4% increase). Significant contributors were the current benchmark Dec 2017 and the Jun 2017 delivery with 439,000 and 334,000 contracts created and make up 91% of the total change. Open interest creation for the current front Apr 2017 slowed to 80,000 contracts as traders prepare for the new front.

The current benchmark Dec 2017 settled at USD 14.31, a minor loss of USD 0.01 when compared to the close of the week before. The weekly average was USD 14.28 which was again slightly lower by USD 0.05 than that of the last week which was USD 14.33.

Moving north to the Ontario market, we can see that the USD prices decreased to USD 14.26 from the all-time high of USD 14.40 of the week before. However, this was solely due to unfavourable exchange rate of the CAD with regards to the USD which has been continually increasing for the last week. In fact, the CAD prices actually kept increasing from the week before and actually reached and sustained an all-time high of CAD 19.25 for the last 3 days of the week. Weekly volume trading for the Ontario Carbon Allowances increased by 225% to 130,000 tons as compared to the 40,000 tons traded the week before. There was no activity for any front other than the benchmark Dec 2017 front in case of OCAs and the prices for the other fronts remained the same as the Dec front.

Ronjoy Bezbarua – ronjoy.bezbarua@californiacarbon.info

Billy Hamshaw – billy@californiacarbon.info

Chandan Kumar – chandan@californiacarbon.info

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