Commodities | May 14 2013
By Andrew Nelson
The spot uranium market crawled along last week, with a handful of trades and a fairly small amount of product changing hands. The market seemingly remains poised between sellers unwilling to play the discount game any longer and buyers that just don’t have a desperate need for supply.
Industry consultant TradeTech reported just five deals last week, with 500,000 pounds of uranium finding new homes. Traders and utilities were the buyers for the most part, with TradeTech noting that prospective new buyers continue to trickle in to hunt for bargains.
The big issue is that current market supply is enough to cover what sparse demand there is. And sellers, sick of offering sub-economic or close-to-it prices, are increasingly unwilling to move any lower. TradeTech reports this theme played out clearly all last week, with the transactions that were closed being booked at, or very near, spot.
This dynamic continues to keep buyers on the fence and sellers at home, given the slowly increasing demand that is being seen is still very price sensitive.
That meant the stubborn sellers prevailed last week, with TradeTech’s Weekly U3O8 Spot Price Indicator finishing last week at US$40.75 per pound, up $0.15 from the prior week’s value.
Analysts at Macquarie had a bit to say about the uranium market last week, noting Kazakhstan, the world’s largest producer of uranium, lifted output in 2012 to 20,900t from 19,450t. This adds up to around 37% of global output. What’s more, the nation’s state-owned miner Kazatomprom reported a few weeks back that the 1Q saw a further 7% production increase year on year.
At the same time Cameco’s much anticipated Cigar Lake project in Canada is due to ship first material to sometime this year, with a steady ramp-up expected to take output to beyond 30m pounds by 2016.
Taking just Cameco and Kazatomprom into account, Macquarie beleives that any sort of significant additional mine supply probably won’t be needed anywhere until at least 2016-17 and that’s despite the supply from the Megatons to Megawatts Program exiting the market this year.
Industry tracker U308.biz had a chat with Cantor Fitzgerald metals and mining analyst Rob Chang last week and he thinks this may well be the year uranium price turns the corner and pushes higher. He told the website he sees a chance of some upward pressure once Japan releases its new nuclear safety regulations in July.
Chang mentioned some commentary from Cameco, which is expecting three Japanese utilities to submit restart applications in mid-July. This could add up to somewhere between five to eight reactor restarts this year, said Chang. He said he has also heard some talk pointing to two other utilities that may also submit applications depending upon how the first three go. Five reactor restarts in Japan would be a distinct positive, not only in terms of added demand, but even more so from a sentiment perspective.
He also confirmed TradeTech’s view that utilities currently have enough supply to meet requirements, at least for the short to mid-term. Longer term, however, Chang confirms there is still a fundamental supply/demand gap. And with current prices nowhere near enough to support new work, supply constraints will only get worse in the near-term. This should ultimately push prices higher, with the only one question remaining: When?
In the meantime, there was no action in the term uranium market last week. There are still a couple of utilities and a couple more non-utilities shopping around, but the market was otherwise quiet. TradeTech’s Mid-Term U3O8Price Indicator was flat at US$ 44.00 per pound last week and the Long-Term U3O8Price Indicator was unchanged at US$57.00 per pound.
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