Spot NZUs slipped 20 NZ cents this week to close Friday at NZ$5.75 ($4.29), and are now valued around 13% lower than seven weeks ago as the impending true-up deadline has muted buy interest.
The spot contract traded in small volumes in a NZ$5.70-6.05 range this week, as both buyers and sellers continued to be in short supply.
“The current moribund nature of the market is probably a combination of many emitters sufficiently long for this time of year and NZUs don’t need to be surrendered until May 2016,” said brokers OM Financial.
“There is a bit of selling about which may keep this market capped for the short term with the range likely to be $5.50 to $6.00.”
Trading in New Zealand’s ETS has slowly ground to a near halt in recent weeks, as compliance buyers focus on getting their books in order by May 31, when they must surrender permits to the government to cover for their 2014 emissions.
Given that scheme participants will rely almost exclusively on UN offsets, interest in NZUs remain low, traders said.
Market participants expect activity to slowly pick up again as soon as the compliances procedures have been dealt with, though some say the market will continue to lack direction until the government releases more information about its intended post-2020 target as well as how far-reaching the ETS review later this year will be.
By Stian Reklev – firstname.lastname@example.org