February 8, 2014 by CaliforniaCarbon.info
CaliforniaCarbon.info, February 8, 2014: After an end to January which saw California carbon allowance (CCA) prices crashing down and wiping out a fortnight’s worth of gains, the secondary market this week witnessed a steady rebound, as prices on both the InterContinental Exchange (ICE) and over-the-counter (OTC) transactions picked up again.
The week-on-week change for the current-vintage benchmark instrument was typical of the fortunes of most CCA vintages and delivery dates. The V2014 delivering this December climbed 2.4% from last Friday’s closing of $12.00 to end this week at $12.29. Similar increments were recorded for other V2013, V2014, and V2015 instruments: V2013 Jun 14, +1.5%; V2014 Dec 15, +1.8%; V2015 Dec 14, +1.6%.
The forward-vintage benchmark, however, typified a gentler uptick for the V2016 instruments. Rising from a close last Friday of $12.40, the V2016 delivering in December 2015 registered a 0.8% increase to end this week’s trading at $12.50. Similarly, the Dec 14 delivery only rose 1.2%.
The slight disparity has reflected a general theme of ICE price movements – price effects have in general been less pronounced with V2016 instruments. The difference between January’s high and low for the forward-vintage benchmark was $0.43 (3.5%), while that for the current-vintage benchmark was $0.60 (5.0%), and for the V2013 delivering in June 2014 was $0.63 (5.3%).
The week-to-week increases in ICE prices were mirrored in the broker-transacted prices. For the OTC future contracts, V2014s rose 1.6% from $12.20 to $12.40, while V2016s demonstrated the same gentler upward slope, inching up 0.8% from $12.50 to $12.60. A similar appreciation was witnessed in the Spot market, where trading closed 1.3% up on the previous week’s close, $11.87 to $11.72.
While prices increased in this week’s trading, volumes decreased nearly in half, in part returning to normalcy after a frantic week in which buyers cashed in on plummeting prices. The total volume traded across all vintages this week was 1,797,000, or 56.0% of last week’s 3,210,000.
Of the four vintages, only the V2013 registered an increase in traded volume, with a 35.5% jump on last week’s 581,000 to 787,000. The V2014 registered a 34.3% fall, dropping from 929,000 to 610,000. The V2016 plummeted from 1,700,000 to 400,000, or 76.5%. There was no trading for V2015 in either week.
There is just over a week to the first auction in 2014, when V2017 allowances will be introduced to the market for the first time. The secondary market generally trades at a slight premium to the primary – which commentators have previously suggested would be in the $0.40-0.50 range – which suggests that the clearing price for the current auction this month will not be much higher than the floor price of $11.34.
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