Commodities | Jun 02 2015
By Greg Peel
The US is the world’s largest nuclear power producer and consumer of uranium, Macquarie notes, accounting for some 30% of global reactor requirements. Last week the US Energy Information Agency published its annual marketing report for 2014.
The report noted that US inventories, in years-of-use terms, remain well above historical averages but at least have stopped growing, albeit current contract coverage is lower than it has been in recent years. On that basis there should be opportunities for uranium sellers in the US market this year and beyond, Macquarie suggests.
However it appears that uranium will remain in surplus for the foreseeable future, thus any positive price impact is dependent on utilities being willing to pay up for supply security.
While the news from Japan has not all been positive of late, last week did see the final permits issued for the restart of Kyushu Power’s Sendai units 1 and 2. The first unit is expected to fire up in late July and the second unit is expected to follow in September.
Last week the Japanese energy minister insisted that due to the high cost of renewable energy, nuclear power must make up 20-22% of Japan’s energy mix by 2030. Pre-Fukushima, it was 30%. Meanwhile over in France, the French parliament is set to vote on a bill aimed at increasing the use of renewables and reducing the country’s reliance on nuclear power.
In potentially good news for uranium producer share prices, the head of China’s National Nuclear Corp has announced China is looking to acquire foreign producers offering sufficient resource bases and production costs at the low end, in order to secure the country’s uranium supply for its fast growing reactor fleet.
Despite all the newsflow, interest in the uranium market has waned to almost non-existent, industry consultant TradeTech notes. Buyers are prepared to buy if prices fall, but sellers are not prepared to give up ground. Last week also saw holidays in the US and UK, adding to the lack of interest.
Six spot transactions totalling 700,000lbs of U3O8 equivalent were reported in the week. TradeTech’s weekly price indicator has fallen US25c to US$35.00/lb.
Three transactions were reported in the mid-term market last week but they were very small, totalling less than a million pounds. The good news is there is a reasonable amount of volume out there being sought on term contracts at present, even if things are moving slowly. Â The bad news is TradeTech has lowered its term price indicators, to US$39.00/b (mid) from US$40.25/lb and to US$46.00/lb (long) from US$49.00/lb.
Last week’s fall in the spot price implies a fall of US$1.00 over the month of May, to US$35.00/lb from US$36.00/lb. The biggest influence on the market over the month was news from the Tokyo Electric Power Company – Japan’s biggest – that it was reviewing its supply contracts in light of growing inventories and a snail’s pace of reactor restart expectations in Japan.
The bad news on this front is that TEPCO will not be buying further supplies but the good news is that the company does not intend to sell excess supplies into the market, as was initially feared.
The month of May featured 25 spot market transactions for a total of 3.0mlbs, down from 4.1mlbs in April, TradeTech reports. The term markets saw a total of 12 transactions, most of them small and not featuring end-users on the buy-side.
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