Commodities | Mar 17 2009
By Andrew Nelson
Activity picked up this week in the spot uranium market, but prices didn’t. Industry consultant TradeTech’s U3O8 weekly spot price indicator continued its recent weakening trend, slipping another US$0.50/lb to US$42.50/lb U3O8 equivalent.
The increased activity, notes TradeTech, was actually brought on by the recent slide in pricing, which has seen a slow but steady increase in buying and overall interest over the last few weeks. Several utilities have entered the spot market of late with the express hopes of securing some material at “bargain” prices.
The bad thing about this is that the increasing level of buying interest is truly discretionary, so Tradetech thinks it is unlikely to result in transactions unless the seller is willing to offer some sort of discount from published prices. This implies that despite increased interest and the prospect of increased buying, pressure remains firmly on the downside for prices.
Now that a few sellers have shown a willingness to accept lower offer prices, the gap between willing buyers and willing sellers has narrowed and to the detriment of the sellers.
The consultant notes that at least one off-market transaction was concluded last week, which involved the purchase of UF6 by a US utility. Another US utility is contemplating a discretionary purchase of approximately 100,000 pounds U3O8, while offers are due today to a US utility seeking long-term offers. However, this utility has indicated it would be willing to accept some material for spot delivery in 2009.
Also putting pressure on the shorter-term spot price is the relatively robust level of demand in the long-term uranium market, which simply encourages buyers to shop for short-term bargains. The long-term spot price remains at US$69/lb.
The team notes that most of the demand is coming from US utilities, but there are several non-utilities either reviewing offers or expected to enter the market soon seeking offers for deliveries out as far as 2021.
