EU carbon prices ended just one cent lower on Thursday in a relatively calm session that contrasted with volatile recent days that have seen carbon extend 20-month lows.
The benchmark Dec-16 EUA contract closed on ICE at €5.63, towards the bottom of the day’s €5.55-5.85 range on turnover of 15 million units, relatively few after a turbulent start to the year that has seen carbon drop as much as 34% and daily trading volumes top 50 million.
Prices kept well above the €5.46 bottom reached on Tuesday, which was the lowest since June. 2, 2014, but traders remain uncertain as to whether EUAs can rebound towards the €8 mark at which they started the year.
“Carbon is showing few signs of an imminent recovery,” said Tom Lord of Redshaw Advisors in an emailed note, pointing out that carbon has failed to strengthen this week despite widening clean dark spreads.
Power prices dropped on Thursday but margins for coal-fired generation generally held firm as a stronger euro made the fuel cheaper to import, keeping spreads at their highest for a week on the 2018 and 2019 vintages.
Meanwhile, carbon analysts battled it out on social media to posit their theories for January’s EUA price collapse.
“A speculative trader probably had the means, motive, and opportunity to trigger January’s CO2 price crash,” tweeted Thomson Reuters Point Carbon analysts.
But Jan Ahrens of ICIS Tschach Solutions doubted that speculators could have had such a sustained influence.
“We see fundamental and structural changes in the power and steel sectors as key,” he added, suggesting muted demand from utilities and increased sales by some beleaguered industrials.
The EU’s auction of 3.425 million spot EUAs cleared two cents below secondary market prices, which barely budged prior to and after the bidding window closed at 1000 GMT, in contrast to recent days when the government auctions have been a source of volatility.
The discount to the secondary market was the smallest so far this week following spreads of 8 and 6 cents in the two previous sales.
Bid coverage of 2.15 was slightly above the 2.05 average in the week’s earlier sales but a smidgen below the 2.20 recorded so far this year across all government auctions.
By Ben Garside – firstname.lastname@example.org