Commodities | Mar 13 2012
By Greg Peel
The now familiar geographical and price differential in the global spot uranium market has continued to narrow, notes industry consultant TradeTech, such that the premium offered for European U3O8 is not as wide as it was a couple of weeks ago over the pervading sell price for US UF6. Yet this hasn't meant potential buyers have been sparked into action.
There are producers and speculators sniffing around current spot price offers, TradeTech reports, but they are showing no urgency to commit. Hence it was another quiet week of spot activity last week with only three transactions concluded totalling a mere 400,000lbs.
Possibly frustrated by smug bidders, one seller decided just to dump and in so doing knocked TradeTech's indicative weekly spot price down US80c to US$51.00/lb.
There are also still plenty of sniffers looking for term supply contracts but again no trades were reported last week, with TradeTech's term prices remaining at US$54/lb (medium) and US$60/lb (long).
As we mark the first anniversary of the Fukushima disaster – that which fundamentally changed the face of global nuclear energy policy – we reflect that were it not for China there would be little if any growth in global uranium demand.
Macquarie notes that China imported 16,125tU of natural uranium in 2011 and another 779tU of low enriched uranium. While this volume represents a fall of 1.5% from 2010, it is still three times higher than China's 2009 import level, Macquarie points out.
China imports its uranium from nearby Kazakhstan and given the proximity and low cost of Kazak production was able to buy at an average of US$45/lb last year compared to global spot indicative prices for U3O8 which settled around the US$52/lb mark post-Fukushima. Macquarie is not concerned by the differential noting that if not for Chinese imports, global uranium supply would be in surplus and global benchmark prices much lower than where they are now.
Around the globe nuclear energy expansion programs are being reconsidered with the prevailing view being one of closing old reactors and not replacing them. China's nuclear program stalled for safety re-evaluation after Fukushima but Macquarie's analysts note that Beijing has since lifted its longer term nuclear power target to 80GW by 2020, which is at the top end of a previously considered range.
A lot of China's imports represent stock-building ahead of the 2020 target which means there is a risk Beijing, as it is wont to do in other commodities, might pause for a while. But Macquarie is confident China's nuclear power targets beyond 2020 will continue to rise with an industry body expecting capacity as high as 150GW down the track. On that basis, there is no good reason for China to stop importing for stockpiles, particularly while prices are depressed.
A pause may occur if prices rise to a point Beijing feels is too high, but as to when that might be is anyone's guess.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
