SBB 14 October Demand for carbon credits from the European steel industry will help to support prices in phase III (2013-2020) of the European Emissions Trading System (ETS) says carbon trader and researcher, Marius Frunza. This source of demand has not been properly factored in by many carbon market analysts, Frunza claims.
As steel production was cut in the aftermath of the financial crisis, the industry was left with an over-allocation of European Union Allowances (EUAs). But from 2013 the industry will need to buy in EUAs, especially if production levels are high. This will result in an entirely new source of demand for EUAs, Frunza points out.
On the other hand, the surplus EUAs built up over 2008-2012 could take some time to be exhausted and so the effect on EUA prices may not be large, counters Barclays Capital’s Trevor Sikorski. The electricity sector will continue to be the main source of demand for EUAs in 2013-2020 and so should have a far more significant effect on prices, he adds.
In the short term, with the eurozone debt crises unresolved, EUA prices are unlikely to move from their current levels, Frunza believes.