Commodities | Aug 30 2007
By Rudi Filapek-Vandyck
The uranium market remains abuzz with rumours, speculations and conflicting news reports. The latest buzz surrounds a large uranium delivery that reportedly was announced by Niger state television on Monday.
The announcement has attracted the attention of the global uranium community for several reasons. Firstly the suggested “minimum price” of US$41.7m for approximately 779,700lbs U3O8 translates into US$53.50 per pound, well below the latest spot prices of US$90-95 as reported by industry consultants TradeTech and UxC.
Secondly, the buyer is the largest operator of nuclear utilities in the US, Exelon Corp, whose nuclear fuels vice president James Malone was one of the first to step into the public arena earlier this year and suggest speculators were simply jacking up the U3O8 spot price to maximise gains for the shares they held in various listed uranium companies.
This transaction would suggest Exelon, and possibly other US utilities too, are looking for additional purchases of uranium outside the US spot market, leaving hedge funds and other financial speculators in the cold with their built-up inventories.
However, details about the transaction have so far not been made publicly available and some experts have already pointed out the mentioning of a “minimum price” may well imply this is simply a bottom price negotiated with room for higher adjustments in case market circumstances require so.
As the deal is not a spot price transaction it will not affect the weekly spot price indicators as reported by TradeTech and UxC. If the contract doesn’t contain any fixed price or clause for escalated prices it won’t affect the longer term price indicators of both industry consultants either.
The bulls in the market have already taken the view that the Niger transaction possibly indicates US utilities are still in the market for further purchases to grow their 80m pound inventories. This may imply they could become active again in the spot market in the near term.
In its weekly update, consultant UxC stated there had been no transactions recorded last week, but it would appear that sellers are holding out for better prices with several offers in the market having been pulled as offer prices did not meet expectations.
UxC also pointed out that as its spot market indicator has now fallen below its longer term price indicator of US$95/lb this had simply restored the historical price premium of the longer term market versus the spot market.
