Market Dynamics Report

FEBRUARY 11 2013

January 2013

NBP composition stabilises, the battle for Coal market share continues and volumes bounce back after the holiday lull.

January 2013 saw a return to pre-holiday volumes for all commodities bar Emissions. German Power was the stand out performer, with volumes up significantly vs December. Much of this increase was due to the recovery of broker bilateral volumes to more normal levels, after their record low December 2012 volume.

NBP, TTF, API2, API4, UK Power and French Power all recorded volume growth vs December 2012. After its stellar performance throughout 2012, German Gas growth slowed this month, although volumes were up vs December 2012. Emissions on the other hand saw a drop in volume this month, down MoM. This coupled with the sharp drop in Dec 2013 EUA prices made for a tough month in Emissions.

NBP saw a month of stabilisation in market composition, with both broker bilateral share and the cleared market at steady levels. The record cleared market shares of October and November 2012 now look to be a blip in the market composition landscape for NBP. What was driving the shift to cleared market volumes during these months? Could it be due to the turn of the gas year? An early reaction to potential regulatory change that has not been sustained? Ignoring these two months, the medium term equilibrium for market share looks to be settling.

Meanwhile, the battle for cleared market share continues in Coal, with this market delicately balanced between the two clearinghouses. CME inched its share back up in API2 and ICE gained in API4. Overall API2 & API4 market share is split straight down the line, a serious shift since pre-August 2011 when there was just one clearinghouse in the market. The proportion of the coal market that is cleared slipped back this month. Dodd-Frank's impact continues to be seen with a definite shift of cleared volume from swaps to block futures.