Commodities | May 01 2012
By Greg Peel
Either something has to give shortly or perhaps the spot uranium market will fade in importance once more as a price indicator, as was the case before the big uranium bubble of the mid noughties. Prior to the bubble the uranium spot market drew little attention given a long stretch of relatively low and stable uranium prices post the Chernobyl disaster. But the China super-cycle changed all that, and suddenly speculators saw a lagging commodity price and a spot market ready to be exploited.
In today's post-Fukushima world however, speculators are looking a bit twice bitten and three times shy (twice being the bursting of the bubble and then the tsunami). Commodity funds appear less interested in including uranium in their baskets, and China appears about the only source of global growth in longer term uranium demand for the time being. Yet that is to forget that operating reactors still need fuel, and right now utilities are queuing up to secure future supply while prices remain near post-Fukushima lows.
Industry consultant Tradetech reports another utility entered the market last week seeking 1mlbs of uranium for delivery over a four-year period. That utility joins another seeking 1mlbs over three years, and another seeking 1.2mlbs over four years. Then there's a utility looking for 1.7mlbs for delivery in 2014-20, and another wanting 2.9mlbs from now to 2032. There are at least a couple of more utilities seeking offers, but the above alone adds to 6.8mlbs of U3O8 equivalent.
Last week in the spot market, only three transactions occurred totalling less than a mere 400,000lbs, TradeTech reports. Buyers snuck up closer to sellers mid-week, but by week's end the bid-offer gap had widened again. TradeTech's weekly spot price indicator remains at US$51.50/lb.
The question is: if you have some uranium to sell at spot and you see demand rolling into the term market, where TradeTech's price indicators are US$53.50/lb in the mid-term and US$60.00/lb for the longer term, would you feel compelled to dump on the first buyer that sticks up its hand, at US$51.50/lb? No, probably not.
And there we have the uranium market at present. Until speculators feel more confident in reentering the market, or perhaps Beijing decides to build some quick stockpiles on cheap spot prices, the sellers have no reason to be aggressive. But that's not to say the uranium market is weak.
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