Summary:

1. Total Weekly Volume = 26.8M tons, -22% WoW Change. Four-week moving average of 32M tons 
2. Market moves up despite 45M tons of Sep21 closures. 
3. ICE CCA price rally to $28.15 despite Sep21 expiry of 45M tons

Last week at the InterContinental Exchange, CCA Prices again rallied despite a substantial expiry of 45M tons on the Sep21 contract. CCA prices only suffered a small $0.10 correction after the front rolled over to Oct21. And then even with low OI creation on the new front, CCA prices moved up by $1.23 over the following three trading days.

From the data last reported to CFTC, on 28th Sep which coincides with the expiry of Sep21, Compliance entities held both short and long positions on the Sep21 contract (see below). Since the data-release date coincides with the contract expiry, we assume that the maximum change was a result of positions on the Sep21 contract.

Also, Swap dealers reportedly increased their V21 net short positions by 5.12M tons. 

Fund Managers went mostly long on V21 Sep21 positions, visible from the drop in total positions below.

CFTC data suggests that swap dealers increased their net short positions substantially and that OI creation was poor on the following days, however, when looking at the total OI holdings by category of trader on the secondary market, Managed Money or Fund Managers show up holding 60% of all Open Interest positions on V21. The graph below presents all V21 OI positions (Long and short) held by the category of traders.

Fund Managers hold 66.6% of all V21 Long positions and 60% of total V21 OI positions reported on CFTC. And this category of traders holds a majorly bullish outlook on the CCA market. Compliance entities have stepped away from the secondary market temporarily to address the upcoming 2021 Triennial surrender event. With the continued strength of Fund Managers in the secondary market, prices are most likely to continue upwards. The next intervention of market fundamentals will appear after the announcement of the 2022 price floor, in November. 

The CCA Forward Curve now appears flatish with the leading edge at $28. Interestingly, even with the amount of movement on the front price, the tail end of the curve remains below the first APCR tier one trigger price of $40 (2021).

*WoW OI Change reported between 23rd September and 30th September. 

Analyst Contact:

Anant Jain (anant.jain@californiacarbon.info)