Thomson Reuters Point Carbon has released this week’s Cross Commodity Report. Recent gains in coal prices are being corrected, though German dark spreads continue to support prices. Carbon prices have benefited from Angela Merkel’s victory in the German elections.
An increased utility demand for coal, combined with high clean dark spreads, allowed coal prices to move higher in the beginning of the week. Although Drummond’s operations in Colombia have now started again following extensive strike action, the return to operations was slower than expected. This put bullish pressure on prices, which were in turn supported by an increase in freight rates. However, prices ended the week in negative territory after traders took profit later in the week.
Coal prices have already corrected some of the recent gains that the market generally viewed as not fundamentally justified. The technical picture is turning bearish, with the CCI in negative territory and the MACD about to cross bearish. However, prices will continue to be supported by healthy German dark spreads, which will provide some support and limit the downside.
EUA carbon prices held steady this week despite heavy auction volumes. Merkel’s victory in the German general election spurred optimism about a swift decision being taken on the back loading of carbon permits. The Dec-13 contract made several unsuccessful attempts to the upside on the back of strong German power prices.
Thompson Reuters Point Carbon forecasts that carbon prices could start the week lower, amid downward pressure from high auction volumes on Monday and bearishness in oil and equity markets due to the US budget crisis and Italian political uncertainty. However, lack of auctions on Wednesday and Thursday could provide some support to prices later in the week.
Adapted from press release by Sam Dodson
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