A last-minute rush to cover short positions ahead of Saturday’s compliance deadline has boosted volumes in Guangdong’s carbon market, with nearly a million allowances changing hands over the past two days.
The bout of deals took the aggregate volume traded in Guangdong’s secondary market since December 2013 past 3 million – with almost a third of that taking place this week.
But given the overall length in the market, the fresh demand had only a minor impact on prices. Guangdong allowances rose 4% on Thursday to close at 18.17 yuan ($2.93).
“Investors and cement companies were behind most of the trades. Guangdong cement production rose 12% in 2014, and since part of the allocation to cement producers is based on grandfathering, that could explain the shortage,” one observer said.
“My understanding is that cement overall is long, but it might be that there are some short ones,” a second source said.
The volume was inflated somewhat by a block of 200,000 allowances that were traded twice. Those units were first sold from a compliance firm to a broker on Wednesday, and then on to another compliance buyer on Thursday, according to market sources.
Friday will be the last trading day before 2014 compliance, and is likely the last chance for emitters to ensure they have enough permits to cover for last year’s emissions, although there has been some rumours about the government extending the deadline by a few days. No official comment has been made.
Meanwhile, the carbon price in Tianjin on Thursday fell 10% for the second consecutive day to close at 11.20 yuan, a new record low across all of China’s seven pilot markets.
By Stian Reklev – firstname.lastname@example.org