Spot U3O8 Market Kicks Into Life In September

This story features PALADIN ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: PDN

By Rudi Filapek-Vandyck

The least that can be said about the uranium market is that it is “lively”. Were we to take a less enthusiastic approach we might have opted for the term “erratic”. But then again, we could also have taken a more positive approach and used a more flattering term.

What cannot be said about uranium right now is that it is a dull market. Major producers (think Paladin Energy ((PDN)) and Cameco) are dealing with Chinese approaches for long term supply commitments. These major producers are also battling with spot prices that are not genuinely shooting to the moon, frustrating many, no doubt.

Meanwhile, in the background, future supply remains an issue. Cameco has already indicated it will put less product up for sale in the short term. In Australia, rumours are becoming more persistent that BHP Billiton ((BHP)) is seriously considering putting its expansion at Olympic Dam on hold. It would seem BHP is concerned the emergence of gas as an alternative source of cheap energy in Australia is impacting on the future potential for yellow cake.

Meanwhile on the spot market overall activity is booming, with industry consultant TradeTech reporting the first few days of September have already seen deals involving a total transaction volume of 1.2m pounds U3O8 equivalent.

The spot price, however, has been very erratic. Two weeks ago, TradeTech had to cut its weekly spot price benchmark to US$44/lb, but on Friday the price had already bounced back to US$46.25/lb. In between, the industry consultant had used its monthly update to quickly reverse the price fall to US$44/lb.

Ah, but the vagaries of the uranium market.

TradeTech's medium term price indicator still sits at US$50/lb, while its long term benchmark sits at US$60/lb.

Click to view our Glossary of Financial Terms