Summary:

1. Market volume increased by 62%, to 47.4M tons
2. Benchmark V21 Dec21 OI reduced by 2M tons 
3. Front V21 Jun21 OI increased by 3.9M tons days before expiry

Last week at the InterContinental Exchange (ICE), CCA weekly volumes surged to 47.4M tons increasing by 62%. Positions on the Jun21 and Jul21 deliveries, expected to roll over this week, increased by a substantial 8.4M tons. Anticipating a sell off pre-rollover, CCA prices closed in the red on Thursday and Friday, closing near Monday level, at $21.59.

Market volumes increased after news of another positive underlying signal for prices. On 15^th June, California released the updated CPI rates. California CPI rate increased by 2.3% in April and that led the ICE market into a rally. An added rate of 2.3% translates to a $0.20- $0.30 increment in the price floor for 2022. Although, current market prices have moved past a reasonable trajectory as the ICE market becomes more semi-strong form efficient. Some of the positivity from that week spilled over as market participants took to betting on the CCA front rollover from June21 to July21. Positions on the Jun21 and Jul21 deliveries, in anticipation of an upward price rollover, increased by a substantial 8.4M tons.

Participants increased V21 Jul21 positions on Monday and Tuesday by about 1.5M tons each day. An increase in positions carried last week’s momentum and CCA contracts gained $0.62 over the two sessions. However, Jun21 positions increased on Thursday by 2.8M tons, days before the front rollover. Additionally, V21 Dec21 positions also shrank by 2M tons. The V22 Dec22 contract too saw closures of 1.3M tons. Buying on the expiring front and selling on the benchmark created a downward price movement. CCA prices fell by $0.37 in the last two trading sessions. The secondary market front closed at $21.59.

A net total of 3.9M tons of fresh contracts entered the ICE secondary market.

The ICE CCA market has experienced a steady upward movement in the past. The secondary market front has gained $2.22 in June alone. Last week we saw the first price correction this month. At present, the Jun21 contract has 17.9M tons of positions while the Jul21 contract has 9.3M tons OI which is about half. In the coming week, the secondary market may feel a new resistance level after the rollover of the front.     

*WoW Change reported between 17^th June and 24^th June.

Analyst Contact:

Anant Jain (anant.jain@californiacarbon.info)