The 2015 vintage contract in Shanghai’s carbon market has dropped 40% to 13.40 yuan ($2.09) on small volumes over the past week, a move that some observers say is due to speculator selling while others argue it is a natural price correction.

The 2015 contract first traded in early November at 22.50 yuan, with a single allowance changing hands, establishing a market price 80% above the 2014 contract even though the two can both be used for compliance without restriction and should theoretically be worth the same.

After several weeks without any further market activity, the 2015 contract has dropped to 13.40 yuan on daily volumes of around 5,000 tonnes over the past week, while the 2014 contract closed Thursday at 11.40 yuan.

“It has been driven by speculators, so it does not reflect over-supply,” one observer told Carbon Pulse.

But analysts at ICIS-Tschach said the price drop is natural, given the low value of the 2014 contract.

“Due to the small volumes in recent trades we believe the recent decline in SHEA15 prices is a ‘gradual’ price correction of SHEA15. We expect SHEA15 prices to converge to that of SHEA14,” ICIS-Tschach’s Jian Wei Lim said in a note to clients this week.

Meanwhile, CCERs on the Shanghai carbon exchange closed Thursday at 18.80 yuan, up 4.4% this week.

By Stian Reklev – stian@carbon-pulse.com

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