CCA prices at a high amid decline in traded volume

March 20, 2017 by chandan.kumar

The market remained flat for the majority of last week due to a lack of trading activity after a heavy period of volatility post auction results. The CCA front opened at USD 13.56, USD 0.02 below the previous week’s close of USD 13.58 accompanied by 120,000 contracts changing hands. The current front CCA remained at a discount to the auction reserve price for the greater part of the week, before rising on Friday to close at USD 13.61, a premium of USD 0.04 above the reserve price and USD 0.03 up from previous week’s close.

With just 952,000 tons traded in total, the week remained the least liquid week since the start of 2017, dropping below the 1 million mark for the first time this year. This week’s traded volume was 45% below the previous week and 65% below the 4-week moving average of 2,695,000. Trading remained concentrated mainly around the current vintage-V2017 besides a transaction of 50,000 and 75,000 for V2016 and V2019 respectively.

In terms of delivery, contracts were spread mainly between the current front and current benchmark (December 2017) delivery with a 28% and 66% share of the total volume traded.  The week also witnessed a single transaction of 50,000 contracts for the upcoming front i.e. April 2017 delivery. The week passed without a single transaction further down the forward curve.

The open interest creation stooped further compared to the previous week, with a net change of 118,000 contracts. 11,000 and 107,000 new contracts were created for March 2017 and December 2017 delivery respectively.

The upcoming front-April 2017 delivery, witnessed some activity on Friday at its 2017 peak of USD 13.62. It registered a week on week gain of USD 0.02 from the previous week’s closing of USD 13.60. The December benchmark also registered a minor gain of USD 0.02, settling at USD 13.75 compared to the previous week’s close of USD 13.73. A rise of USD 0.02 or more was observed along the remainder of the forward curve.

North of the border, Ontario’s cap-and-trade market passed without a single transaction during the week as the market participants geared up for the upcoming first auctions to be held on 22nd March.  The market closed at CAD18.41 on Friday, unchanged from the previous week’s close. However a minor weekly change exchange rate from CAD 1.347 to 1.337 per USD renders OCA’s USD 0.10 costlier than the previous week’s closing. OCAs price closed at a premium of USD 0.02 above the current vintage equivalent in California. However this premium was driven mainly by the exchange rate and not a reflection of market sentiment.

Chandan Kumar (chandan@californiacarbon.info)

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