Commodities | Sep 27 2016
Spot uranium demand from utilities has picked up of late but sellers are the more urgent party, leading to further price falls.
By Greg Peel
Last week the International Atomic Energy Agency released its latest projections suggesting global nuclear power supply could grow by as much as 56% to 2030, which would represent an unchanged level within the energy mix. Asia is the critical centre of growth. China plans to build sixty new reactors in the next ten years.
There will be no contribution to growth from the US. Last week the US Energy Information Agency released its own projections to 2040 suggesting the number of new reactor start-ups and extended licences for existing reactors over the period will be more than offset by the number of reactor retirements. Competition from cheap gas-fired electricity generation and subsidised renewable power sources will make a number of older reactors commercially unviable.
In the more immediate future, there is still an expectation demand from utilities for medium and long term delivery contracts is set to increase and at present, spot market demand has clearly ticked up as utilities look to exploit historically low prices. The spot uranium price is at its lowest level since 2005 and for a longer period in real price terms. Yet increased demand is only serving to spark uranium producers and intermediaries into a race to unload product at whatever price.
“The explanation for this can be attributed to a number of factors,” industry consultant TradeTech said last week, “as varied as the sellers in the market. Increasing financial pressure and the need to generate cash, year-end sales objectives, and utilities that are generally well covered in the near term, have left sellers scrambling to lock in business. Sellers acknowledge that while significant demand is expected to emerge shortly in the mid- and longer-term markets, they see little spot demand and must capture sales opportunities as they arise”.
The result is one of increased demand forcing prices lower. Five transactions were concluded in the spot market last week, totalling less than 500,000lbs U3O8 equivalent. Desperate sellers drove TradeTech’s weekly spot price indicator another US50c lower to US$24.25/lb.
One transaction was reported in term markets last week, for 1mlbs U3O8 over a five-year period. TradeTech’s term price indicators remain unchanged at US$26.70/lb (mid) and US$38.00/lb (long).
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