European carbon prices climbed for a third straight day on Tuesday, buoyed by strong auction demand and healthy profit margins for German coal-burning utilities.

Front-year EUAs ended the day up 13 cents at €7.61 with nearly 16 million units traded, which was heavy volume compared to recent days.

The benchmark contract lodged a 20-cent trading range between €7.43-7.63, the most in a week.

“We’ve had two strong auctions so far this week,” one trader said, citing the main reason behind today’s gains.

An EU auction for 2.918 million spot EUAs held earlier on Tuesday cleared at €7.48 – some 2 cents above market.

Monday’s sale for the same amount fetched a price some 3 cents above the spot market rate at the time the auction ended.

However, the number of units bid for in both auctions – just under 9 million – was in line with recent sales.

EUA futures down the curve also saw healthy activity on Tuesday, with more than 3 million units traded collectively on the Dec-17s and 18s.

“Utilities are seeing higher dark spreads as well, with some delayed demand from last week, when there was less supply and the Germans were on holiday,” the trader added.

Last week saw only three government auctions offloading a total 9 million units, while many German-based traders enjoyed a long weekend in taking Friday off following Thursday’s public holiday.

German calendar-year clean dark spreads remained within sight of their recent one-month highs on Tuesday, as a firmer euro partially offset rising carbon and dollar-denominated coal prices.

A noticeably sizeable 295,000 CERs also changed hands on ICE, with the bulk done on the Dec-16s.

By Mike Szabo – mike@carbon-pulse.com