CN Markets: Shenzhen CO2 permits plunge to record lows as individual traders exit

Published 14:01 on July 6, 2015  /  Last updated at 19:52 on March 16, 2017  /  China, China's Pilot Markets  /  No Comments

Shenzhen’s carbon price plunged to 28.87 yuan on Monday, the lowest level since the market opened in June 2013, as individual traders exit the scheme following last week’s compliance, observers said.

Shenzhen’s carbon price plunged to 28.87 yuan on Monday, the lowest level since the market opened in June 2013, as individual traders exit the scheme following last week’s compliance, observers said.

On June 27, a Saturday, when the local carbon exchange stayed open ahead of the June 30 compliance deadline, the Shenzhen 2014 contract closed at 52.71 yuan.

But since then, the contract has shed 45% of its value, as the demand side of the market has vanished. It fell 10% on Monday, and in the past four sessions, a mere 3,400 allowances have changed hands in total.

The 2013 contract remains at 40 yuan, but has not traded since Wednesday last week.

“The recent rapid decline in SZEA prices is within our expectations and in line with our Q3 price forecast of 28 yuan,” said Jian Wei Lim, an analyst with ICIS-Tschach.

Individual traders have played a key part in the Shenzhen market from the outset, and were responsible for briefly pushing the price up to over 130 yuan in the early days of the market.

According to ICIS, individuals accounted for 61% of all trades in the market in the Jan-Apr period this year, up from 37% in the same period last year.

“These speculators might have started to exit the market once the compliance period ended,” Lim said.

With individual speculators out of the game, demand would mostly fall on compliance buyers, which have little urgency as the next compliance date is nearly a year away.

HUBEI TRANSPARENCY

Meanwhile, the Hubei carbon exchange on Monday made an unprecedented move as far as transparency goes in the Chinese pilot markets.

Ahead of Friday’s compliance deadline it published a list of 60 companies that had already surrendered permits, and revealed that those firms had handed over a total of 119.1 million allowances to cover their 2014 emissions.

The list did not include individual emissions data for each company but if the Hubei exchange updates the list in similar fashion after everyone has complied, it would be the first of China’s seven pilot markets to publish emissions data for ETS participants.

The province, whose market opened last year, issued 324 million allowances for 2014.

By Stian Reklev – stian@carbon-pulse.com

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