EU Carbon Drops To Record Low For 2008-12
Date: 04-Feb-09
Country: UK
Author: Gerard Wynn and Nina Chestney
LONDON - European carbon emissions futures dropped to a new record low for the second phase of the European Union's emissions trading scheme on Tuesday.
Benchmark EU Allowances hit 10.76 euros ($13.84) a ton at 1422 GMT, edging below their previous record low of 10.81 euros on January 20 [ID:nL3160394]. They opened trade at 11.29 euros a ton.
Traders said carbon's gradual move south this week followed a period of consolidation and profit-taking.
"There is no new news. People were trading on the cold weather forecast last week and are now trading on next week's warm weather," one carbon trader said.
"Unless utilities by with earnest it will be difficult for prices to go up," the trader added.
Carbon traders are weighing the possible impact of industrial companies participating in the European Union emissions trading scheme selling surplus carbon emissions permits that they have accrued as a result of falling output.
Companies for example in the steel, cement and paper sectors can sell their surplus permits, called EU allowances (EUAs), on the carbon market to raise cash.
This month companies will get their 2009 allocation, raising the prospect of further sales driving the price down more.
The price of EUAs follows expected long-term demand for emissions permits, which has sagged on expected falling industrial output.
Another factor which could weigh on prices is Polish EUA issuance, which is expected in the next couple of weeks, Barclays Capital analysts said in a note.
"With 14 percent of EUAs still not issued, mostly in Central European member states, the pressure on the spot market is likely to mount when issuance (...) finally occurs," they said.
German Cal '10 baseload power was down 20 cents at 49.75 euros per megawatt hour.
U.S. light crude for March delivery traded around $40 a barrel, as some investors grew convinced that aggressive supply cuts by OPEC may finally be building a floor under crude prices.
Benchmark certified emission reductions (CERs) were down 11 cents or 1.09 percent at 9.95 euros a ton. The EUA-CER spread narrowed to 87 cents.
Barclays Capital expects the spread to test a one euro a tonne level for the rest of the year as further downside weighs.
