Uranium Is Becoming Interesting Again

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Rudi Filapek-Vandyck

Investor interest for uranium is on the rise on the back of a 16% price rise for spot U3O8 since March this year. Weekly spot price benchmarks remained unchanged at US$48/lb this week but market commentators are quick in pointing out it has been 10 long months since we last saw this level of spot prices.

And support, it would seem, is coming from all kinds of different market corners. Leading producers such as Cameco have been holding back on their product supplies. Recently Cameco even announced it had been buying some product on market as an “investment”.

BHP Billiton ((BHP)) is still mulling over its expansion plans for Olympic Dam. Market rumours have it the world's largest diversified miner is genuinely concerned that a booming gas industry in Australia will eat into tomorrow's price potential were it to go ahead with the scheduled production capacity expansion.

Moreover, one of the more popular research reports on the uranium sector recently suggests Kazakhstan might hold off on some potential supplies too. This might explain why the report has been emailed several times the world over these past few days.

Everybody with only a smidget of interest in the uranium market knows the outlook is very much tied to what Kazakhstan does or doesn't, so any conservatism shown by Kazakh producers can only be a good thing for the rest of the industry overall.

There's still the issue of increased interest from utilities in Asia, China in particular.

And now the hedge funds are back too.

At least, Jeff Combs, president of industry consultant Ux Consulting, has been telling a journalist at Bloomberg that hedge funds are back, and they're buying in anticipation of higher prices.

In the very short term, however, none of the above seems to have much of an impact on the uranium spt market, with both UxC and TradeTech leaving their weekly spot prices at US$48/lb this week. TradeTech has observed a dramatic fall in overall market activity, noting several potential buyers have retreated to the sidelines following some heft price rises in recent weeks.

Nevertheless, TradeTech still recorded three successful transactions during the week ending on Friday, good for a total volume of 325,000 pounds in U3O8 equivalent.

The consultant believes both buyers and sellers are re-considering their positions now that US$50/lb is once again in the market's sights.

TradeTech also left its mid-term price benchmark unchanged, at US$50/lb, and its long term price indicator at US$60/lb.

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