EUA Dec20: 30% loss in two weeks

2020-03-23 00:00

The price of the benchmark carbon contract hit a 22-month low 23 March as the negative economic effects of the coronavirus took their toll on the emissions of power companies and industrial plants. The announced economic measures caused a bounce back in the price, but this could be short-lived as the price has to face several resistances represented by gaps.

Although the carbon market remained relatively resilient after the first coronavirus cases emerged in Europe, in the second week of March the price started plummeting and lost more than 30%.

On 6 March, the benchmark carbon contract closed at 23.42 euro and two weeks later, on 20 March it settled at 16.11 euro. The price of the EUA Dec20 fell to 14.34 euro on 23 March, after Italy shut down all non-essential industry and investors asked themselves which country would introduce similar steps next.

The decline was accompanied by record high traded volumes. On 17 and 18 March, more than 80 million allowances traded in the benchmark contract. The March daily average traded volume is 42.9 million until now, while in February it was 25.3 million.

Although the relative strength index slipped below the critical 30 level on 13 March already, sellers didn’t stop pushing the carbon price lower.

The announcement of governments and central banks in Asia, Europe and the US, the sell-off came to a halt and the carbon price also started to recover. The risk of a recession causing significantly lower emissions and therefore reducing the demand for allowances is still present, but investors are optimistic that with the help of the economic measures, the companies would be able to come back to normal in a relatively short time.

After reaching a 22-month minimum on 13 March, the price didn’t fall any lower. In the first bounce back, the price could retest the resistance level at 18 euro.

In the next days, investors will also watch the gaps the price left when plummeting as they can prove strong resistances.
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Falguera, Marc - ES
Bujacz, Tomasz - PL
Wilamowski, Bartosz - PL
Verger, Guillaume - FR
José M. García Berrendero - ES, PT
Abajas, Africa - Aviation
Gordziel, Christian - DE
Härmatis, Alexandra - SE, NO, DK

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