June 2017: German Power drags down monthly volumes despite continued growth in gas markets.
With half of 2017 completed, the trend of lower volumes continues. June produced MoM and YoY declines as total contracts traded retreated 2.8% from May levels settling at 6.454m contracts. Modest MoM volume growth in the gas markets were offset by significant declines in the power markets in particular the German and Italian markets, which were down 21% and 18% respectively. The 2017 YTD deficit widened to 14% vs YTD 2016.
In contrast to May when the dominant German Power market showed signs of overall volume growth, June produced declines across all metrics: down 21% MoM, down 41% YoY and down 8% YTD. The substantial declines were coupled with a continued shift toward the Broker Bilateral market as it gained a further 4% market share at the expense of the Broker Cleared market that held 12% of the German Power market in June compared to 17% in June 2016. Despite 2017 YTD total volumes being down 295 TWh (8%), Broker Bilateral volumes are on par with 2016 levels illustrating that the Broker Cleared and Exchange Execution are responsible for 100% of the 2017 YTD declines. Are the weaknesses in these markets a result from the recent split of the Phelix Power contract which itself was driven by German-Austrian bidding Zone split? We will pay particular attention to the German Power volumes as the market moves forward from this significant event.
Elsewhere in the Power markets there were small amounts of volume growth in markets such as UK Power, French Power and Spanish Power provided double-digit MoM growth. However, this was not enough to alter the yearly trend of volumes down YTD across all Power markets.
As mentioned, the gas markets provided solid MoM volume growth across the board with two exceptions. France Hubs and PSV were down 17% and 21% respectively. However, these are the only two markets showing YoY growth this month. The tussle between the dominant TTF and NBP markets continues as both markets increased MoM volumes by 3% giving TTF 106% of NBP volumes in June. Interestingly the Broker Bilateral market gained 3% in NBP market share as volumes increased 68 TWh (12%) from May giving it 42% of the total market. The opposite was true in TTF as Broker Bilateral lost 6% of the market share in June as volumes declined 65 TWh (6%). Despite the MoM volume increases, 2017 YTD volumes remain below 2016 YTD levels across all gas markets.
Coal has not shown any signs of bucking the overall trend as both API2 and API4 volumes are down across all metrics. API2 volumes are down 55% YTD vs. 2016 after declining 23% from May-17 levels to finish June on 125m metric tonnes traded. API4 experienced similar falls as volumes declined 12% MoM and is currently 66% below YTD 2016 levels. Broker Bilateral volumes continue to be non-existent in both coal markets following the data correction from LEBA last month. The Broker Cleared market stemmed the flow of volume to Exchange Executed as it gained 4% in both coal markets. Despite this, the growth in Exchange Executed volumes is impressive with API2 volumes increasing 21% YoY despite overall API2 volume down 63% YoY. CME lost further ground to ICE in the cleared coal market, down 3% from May-17 to 36% market share in June. Could the imminent closure of CME Europe and related shift of all CME Euro Energy products onto a single platform (NYMEX/Clearport) reverse the loss of market share as they achieve critical mass? Will make for interesting viewing into 2018.