Trades indicate a quiet annual transition for the CCA market

January 8, 2018 by Abhilasha Fullonton

CaliforniaCarbon.info, January 8, 2018: After a slow week post-Christmas and pre-New Years, California Carbon Allowances (CCAs) saw a 3-cent increase with exceptions for Feb 18 and May 18 which saw 4-cent price hikes at the beginning of the week in V2018. The linkage with Ontario did not bring about any drastic changes in CCA prices as expected. After Monday (01/2) the prices went down by 2-cents and continued on that path until the end of the week where CCA prices saw an additional 2-cent decrease on avg. As of Friday (01/5) the current front (V18 Jan18) stands at USD 15.03 and benchmark (V18 Dec18) stands at USD 15.44. This indicates 2-cent and 1-cent decrease, for the front and benchmark, since last week.

 Volumes traded last week amounted to 3,251,000 tons. As mentioned in our previous Weekly Outlooks and price commentaries the price floor and Ontario linkage did not have a big effect on current CCA prices as these impacts were already priced in post AB398. When compared to last year (Jan17) which saw about 5,654,000 tons traded, volumes were underwhelming this time around. However, we expect entities to pick up the pace as over the next couple of months as we approach Joint Auction 14 on 21st Feb. Along with the upcoming auction in February, the Ontario elections in June will also become a main driver for prices.

Volumes traded concentrated mostly in two vintages with V2017 taking the lead followed by V2018 while none of the other vintages saw trades. V2017 traded 1,904,000 tons which makes up 58.57% and V2018 saw 1,347,000 tons traded which is 41.43% of the total.

Volumes were spread out between three deliveries– Mar18 (2,156,000 tons), Jan18 (960,000 tons) and Dec18 (135,000 tons). These accounted for 66.32%, 29.53% and 4.15% respectively.

Open Interest changes

A total of 425,000 OI contracts remain open this week.  500,000 contracts opened up for Jan18 while 75,000 and 150,000 contracts closed for Mar18 and May18, respectively. Around 127,000 contracts closed for V2017 while 552,000 opened up for V2018.

OCA reaction

Unlike CCA prices, OCA had a pretty volatile week, even throughout the holidays. Post linkage Ontario prices dropped 7-cents followed by a 6-cent gain mid-week. Prices continued to drop 9-cents and by the end of the week there was a 15-cent drop in OCA prices. As of Friday (01/5) the OCA front stands at CAD 18.70 and benchmark stands at CAD 19.17. OI remained consistent throughout the week with 3,000,000 for Mar18 while no volumes have been traded recently.

Abhilasha Fullonton (abhilasha.fullonton@californiacarbon.info) 

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