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Another cement maker holds allowance surplus, as CO2 price too low

02 Aug 2013 19:38:42 | edcm

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Italy-headquartered cement maker Buzzi Unicem continued in its strategy of not selling any surplus EU allowance (EUA) in the first six months of the year because current prices are too low, the company told ICIS on Friday as it published its first half-year results.

Hope that production levels will recover - with a consequent increased need for EUAs for compliance - also impacted the decision, a spokesman said.

The company said it has not sold any surplus allowances since August 2011, when the front year EUA contract was valued above €10.00/tonne of CO2 equivalent (tCO2e), according to ICIS data.

The spokesman did not identify a target price at which the company would sell what it labelled its "significant" surplus, accrued as production levels plunged.

Cement maker Lafarge said last week it was adopting the same strategy due to low carbon prices and could continue not to sell for the rest of the year (see EDCM 26 July 2013).

Earlier this week another Italian cement producer, Italcementi, also said it did not sell any EUA in the second quarter of 2013.

A counterparty at a trading house recently told ICIS that industrials often identify a price level under which they do not want to sell their surplus, as they have a target for carbon revenues. Many do not want to sell below €6-8/tCO2e, he said.

An additional reason that is discouraging industrials from selling their surplus is uncertainty regarding the 2013 free allocation, which they will receive only in the fourth quarter after the European Commission decides if preliminary calculations need to be slashed in order to fit the available pot of free EUAs.

An aversion to selling EUAs due to low prices strikes with the general attitude of the European manufacturing industry, which is openly against the back-loading proposal by the Commission that is meant to support prices in the short-term, on the back of the assumption that it would increase energy prices in a time of recession.

During the first six months of the year, Buzzi Unicem said it moved EUAs across its different European divisions, as it was short in Germany and long in Luxembourg, Czech Republic, Poland and Italy.

The German division had to purchase EUAs from other divisions for a total value of €1.9m. Silvia Molteni

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