Spot NZUs extended their three-and-a-half-year highs this week, rising 3.4% to close Friday at NZ$7.50 ($4.91), with sellers gradually retreating in an attempt to lure buyers higher.

The contract grew firmer as the week went, eventually finishing 25 NZ cents higher than last week, though on slightly lower volumes, according to market participants.

“There is still liquidity, but we see sellers holding back and there is not a lot of volume immediately available,” one source told Carbon Pulse.

“But as volume diminishes, buy interest is growing as emitters have liability to cover with the end of the year approaching,” the source said.

Observers said the upcoming Paris summit and the ETS review – for which the government has yet to release terms of reference – helped prop up the bullish market sentiment.

“This market is looking rock solid and any dips are likely to be very contained – any trade below $7.40 would come as a surprise,” brokers OM Financial said in a note to clients.

The New Zealand carbon market occasionally takes very big price leaps in a short space of time, and one observer said such a move upwards might be brewing now as buyers realise they will probably have to go significantly higher to unlock big volumes.

By Stian Reklev – stian@carbon-pulse.com

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