Commodities | Oct 04 2011
By Greg Peel
Unlike the uranium spot market, which in recent weeks has been dominated by traders and hedge funds on both sides of the price, the uranium term market more represents legitimate supply deals between producers and utilities and is thus more representative of ongoing longer term uranium demand.
Term uranium prices slipped initially after the Fukushima disaster but for many weeks prices have remained stable in a quiet market while spot traders have battled back and forth around the significant US$50/lb level in somewhat of a vacuum of uncertainty with respect to uranium's future. Last week, however, those stable term prices finally gave way.
Industry consultant TradeTech's mid-term price indicator has fallen US$1.00 to US$55.00/lb and TradeTechs' long-term price indicator has fallen US$2.00 to US$63.00/lb. The price falls may not be large but they are nevertheless significant in a market now dominated by the collapse of Japanese demand.
The falls come in a week when the spot price once again found itself under pressure, and in which traders and hedge funds were the dominant players on both the buy and sell sides. Producers and utilities have largely moved to the sidelines.
TradeTech's weekly spot price indicator has fallen US$1.00 to provide an end-September price of US$52.00/lb. While that price is encouragingly US$2.75 above the end-August price, spot uranium traded as high as US$54.50/lb intra-week during the month.
TradeTech notes the uranium market has historically been well insulated from the immediate global economic cycle, given the long term nature of “real” supply contracts informing speculative spot deals. The mood has changed, however, with the consultant suggesting, “The thin and illiquid nature of the spot uranium market means that even the slightest shift in supply or demand can directly impact on price, which was evident during September”.
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