Uranium Week: Relief In 2017?

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After suffering a substantial price collapse in 2016, uranium has begun 2017 in a slightly brighter mood.

By Greg Peel

Welcome to FNArena’s first Uranium Week report for 2017. Believe it or not, the uranium spot price has begun 2017 with two consecutive weekly gains.

In the first week of January industry consultant TradeTech’s weekly spot price indicator rose US$1.50 to US$21.75 and last week rose a further US75c to US$22.50/lb. Did we see the bottom at US$18/lb? On average, the spot price fell 0.7% each week of 2016.

One swallow…they say. But it is a generally held belief that uranium prices must eventually recover for the simple reason the spot price remains well below the average global cost of production, and way, way below the estimated incentive price for new production. With the demand side still impacted by the glacial restart of Japanese reactors, the closure of legacy US reactors, and a shift away from nuclear power in Europe, further supply-side curtailments and closures simply cannot be avoided for much longer.

Production Cuts

In Australia, uranium producer Paladin Energy ((PDN)) continues to burn cash at current prices, and has responded with curtailments and divestments. Energy Resources of Australia ((ERA)) is enjoying much stronger legacy contract pricing for its stockpiled ore but has its expansion program on indefinite hold. In Canada, world-leading producer Cameco has curtailed production.

The greatest resources of uranium lie in Kazakhstan where last week state-owned producer Kazatomprom surprised the market by announcing a 10% production cut in 2017 due to near term global oversupply. Meanwhile, another legacy US reactor will be closed in New York State after 40 years of service due to economic unviability. Demand-side growth all comes down to China in the near term and in the medium term, India and other emerging economies.

The Kazakhstan announcement helped to sustain upward momentum in the uranium spot price last week but measuredly so. Six transactions were concluded totalling 550,000lbs U3O8 equivalent, TradeTech reports.

There were no transactions reported in uranium term markets nor any fresh demand. TradeTech’s opening term price indicators for 2017 remain at US$22.00/lb (mid) and US$30.00/lb (long).
 

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