China : Institutional Investors’ Buying Props up Shanghai ETS Trading

Shanghai Emission Trading Schemes (ETS) recorded transactions in 11 days in a row between 19 September and 10 October, versus none in July and August. Increasing trading was ascribed to institutional investors.

In addition, the daily average settlement price rose to yuan (CNY) 35.10/tonne on 10 October, up from CNY29.00/tonne on 4 September, ICIS data show.

After entering the 2014 compliance period, no transactions were made in July or August. In September, institutional investors were introduced into Shanghai ETS and began their moves before long. In the past two weeks, most of allowances put up for sale in the Shanghai exchange were purchased by institutional investors. From 19 September to 10 October, 22,400 tonnes allowances were traded with a turnover of CNY760,560.

Recent buying orders were from institutional investors, who also pushed up prices, a manager from the Trading Department of Shanghai Environment and Energy Exchange told ICIS on 11 October. The manager also suggested that it was rational for compliance entities short of allowances to purchase allowances at present. However, the entities with surplus quota might be reluctant to sell and they will probably wait for further price rises.

A Shanghai-based large chemical enterprise told ICIS that it had quite serious allowance shortages in 2014, but it would not buy large amount of quota before prices rise further. Instead, it would proceed with planned purchases to control costs risks, said a carbon trading manager from the company. Kun Yang