David Fuller and Eoin Treacy's Comment of the Day
Category - Energy

    How China's New Carbon Market Will Work

    This article from Caixin may be of interest to subscribers. Here is a section:

    Before the launch of the national ETS, China had already established regional ETSs in eight provinces and cities, including Beijing, Shanghai and Shenzhen. Seven of the regional ETSs started trading in 2013, while the one in the eastern province of Fujian kicked off three years later. These regions allow companies to buy carbon credits equivalent to as much as 5% to 10% of their original quotas or actual emissions. The average price of carbon credits traded on the regional ETSs stands at 50 yuan ($7.73) per ton, analysts at Guotai Junan Securities Co. Ltd. estimate, far lower than the 250 yuan equivalent per ton in the EU ETS in 2020.


    Initially, China’s national ETS will only cover the electricity generation sector. A batch of 2,225 electricity companies (link in Chinese) will participate in the trading.

    In addition to electricity, the trading system will eventually cover seven other industries (link in Chinese), including petrochemical, chemical, construction materials, steel, nonferrous metal, papermaking and aviation. Companies that emit greenhouse gases equivalent to more than 26,000 tons of carbon dioxide a year will be included in the system.

    It is expected that financial institutions will indirectly engage in the carbon market, as central bank Governor Yi Gang in April said that “the carbon market should be a financial market in nature and allow carbon financial derivatives trading.”

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    Email of the day on Seadrill

    Thanks for bringing Seadrill to our attention back in April. Given the recent price performance what are your thoughts from a chart and fundamentals perspective? Many thanks and best wishes, Nav

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    Orocobre June Quarter Output 3,300 Tonnes of Lithium Carbonate

    This note covering Orocobre’s production results today may be of interest.  

    About 66% of production was battery grade lithium carbonate vs 21% a year earlier.

    Sales of Olaroz lithium carbonate were 2,549t at $8,476/t FOB, with pricing up 45% on the March quarter

    Inventory has increased due to Covid-19 related transport delays and the requirement to hold additional safety stock in Japan to guarantee delivery into the Prime Planet Energy and Solutions contract

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    U.S. Service Industries Expand at Slower Pace Than Expected

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    The services index of inventories also shrank, indicating that supply chain constraints continue to hold back economic activity. Supplier delivery times remain elevated due to truck availability, slower rail services, port congestion and container shortages, Nieves said on a call with reporters.

    A separate gauge of inventory sentiment dropped to a record low, showing more service providers see their stockpiles as too lean. The index of prices paid for materials fell slightly, suggesting that while still elevated, the acceleration in cost pressures may be starting to cool.

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    Saudis, Russia in Tentative Deal for Gradual Oil-Output Hike

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    “The last thing Saudi Arabia and the United Arab Emirates, even Russia, want is $85 a barrel, much less $100 a barrel,” Bob McNally, president of Rapidan Energy and a former White House official, told Bloomberg Television on Thursday. “So far in Washington, it’s been quiet. As we get closer to $80 a barrel, it’ll set off alarm bells” about the risk it poses to the economic recovery, he said.

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    China Banks Stockpile Record $1 Trillion of Foreign Exchange

    This article from Bloomberg news may be of interest to subscribers. Here is a section:

    Some officials “may see the foreign-exchange liquidity as a feather in China’s cap, and some may worry that the surge is flighty,” said George Magnus, a research associate at Oxford University’s China Centre. “It’s fine when the flows are coming in, but a big problem for financial stability when they try and go the other way.”

    For Magnus, the increase in dollar deposits is “random and most likely temporary,” and will slow when other nations recover from the pandemic.

    While it lasts though, the situation offers an opportunity for China to implement reforms and loosen its grip over its tightly controlled capital borders.

    “China will take the chance of flush dollar liquidity to make its cross-border flows more balanced,” said Becky Liu, head of China macro strategy at Standard Chartered Plc in Hong Kong. “Policy makers in the coming two to three years will keep widening channels for funds to leave the country.”

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    The monumental challenge of trying to hit climate targets

    Thanks to a subscriber for this report from National Bank of Canada. Here is a section:

    Raisi Victory Will Delay Return of Iran's Oil, Analysts Say

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    The election of a conservative cleric as Iran’s president will probably hold up the lifting of U.S. sanctions on the Islamic Republic’s energy exports, said analysts including Sara Vakhshouri, president of SVB Energy International LLC.

    “The election of a hard-liner delays the expectation of a rapid return of Iranian oil,” she said.

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    As good as it gets, for now

    Thanks to a subscriber for this report from Macquarie which may be of interest to subscribers. Here is a section: