Commodities | Jul 16 2007
By Rudi Filapek-Vandyck
Three weeks ago spot uranium recorded its first price decline in 47 months as industry consultant TradeTech decided to pull back its weekly price indicator by US$3/lb to US$135/lb. Another US$2/lb price fall occurred in the following week. On Friday TradeTech’s weekly spot price declined by a further US$4/lb to US$129/lb.
UX Consulting, the other industry consultant who sets a weekly price indicator, has yet to update its price but each pull back by TradeTech over the previous two weeks has been met by Ux with a similar decision.
The scenario behind these downward price movements has remained the same: speculative holders continue trying to offload some of their inventory while buyers seem in no hurry to jump on the opportunity. The result is for continued price weakness with market watchers predicting this situation can last for several weeks still.
In a midweek update on the uranium market, Ux stated last week that another delay for Cameco’s Cigar Lake project was unlikely to have a similar effect as happened in the final quarter of 2006 as the delay would be taking place further into the future, and this was simply giving other suppliers more time to react.
Ux also said sellers of uranium were prepared to accept lower prices for their offerings and the spot uranium price was therefore expected to remain under pressure in the short term. The consultant predicted –accurately as it turns out- that the price for U3O8 (uranium concentrate or yellow cake) for short term deliveries might well drop below US$130/lb.
In addition, the consultant noted that it was not only U3O8 prices that have landed under downward pressure with weakness being detected in offers for UF6 (Uranium hexafluoride) as well.
Meanwhile, Washington Nuclear Corporation who calculates average price values for uranium held by professional investors reported its so-called Blended Financial Value (BFV) fell to its lowest price point since March 21, 2007 on Wednesday morning. The BFV increased on Thursday and fell back again on Friday as investors started to price in some value from further delays at Cameco’s Cigar Lake project.
WNC’s BFV posted nevertheless a minor decline over the week and this was for the fifth time in a row.
In further proof that Canadian experts are right on the ball when it comes to the uranium market, Toll Securities reported on Friday it was likely the uranium spot price would continue to face downward pressure over the summer months. Toll repeated the view put forward by TradeTech and Ux earlier that buyers/consumers appeared to have fulfilled most of their requirements through to the end of this year and they are therefore in the luxury of holding out and wait and see what happens in the short term.
Toll Securities predicted spot uranium was likely to fall again this week but the analysts also said they are not concerned about a potential price breakdown. Toll expects the spot price to recover in the fall instead.
It would appear that TradeTech’s latest market update supports the thesis that spot uranium prices may weaken further in the weeks ahead as sellers were seen offering uranium at lower prices but only one small transaction had been recorded. This was sufficient to push the consultant’s weekly price indicator below US$130/lb. Spot uranium surged above this price level in June.
