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Market Dynamics Report

JULY 11 2013

June 2013

Continued competition in Coal, Emissions price support passes first hurdle, and UK Gas majority under threat

Coal takes centre stage again this month, with competitive tensions increasing amid soaring volumes. Total volumes executed in API2 increased MoM, and are up YoY and YTD 2013 vs. YTD 2012; while volumes in API4 also grew MoM and are up YoY and YTD 2013 vs YTD 2012. The cleared market lost some share this month as a percentage of the total API2 volume vs. May. Of this cleared portion, two major exchanges continue to battle to maintain the majority share. API2 & API4 both posted record low prices this month.

The European emissions market followed similar trends this month – with the most liquid EUA contract posting volumes up MoM, YoY and YTD 2013 vs YTD 2012. Market composition shifted back towards the brokers during June, with exchange executions dropping vs May, to the benefit of broker clearing. Prices continue to trend slightly upwards after the nadir seen in April. Last week's positive vote for the first hurdle of the backloading bill, aiming to reduce supply by 900m EUAs, should help to continue to support prices. The continued increase in emissions volumes is pushing this commodity class up as a total of Euro Commodity volumes YTD 2013 vs YTD 2012.

UK Gas' position as the largest European Energy commodity class is under threat, with Euro Gas liquidity almost two thirds the size of UK Gas YTD 2013 vs. YTD 2012. TTF and the German Gas hubs are showing consistent increasing volumes, up MoM, YoY and YTD 2013 vs. YTD 2012, while NBP volume is down YTD 2013 vs. YTD 2012. Continental gas is showing signs of increasing importance in the European Energy markets. Market composition for UK Gas was relatively stable for the month, while Euro Gas remains heavily brokered.