FYI | Jul 11 2012
By Andrew Nelson
It’s got to be getting frustrating for uranium investors out there. The World Nuclear Association says there are 435 active nuclear power reactors operating in 30 countries. That number is expected to increase steadily in the years ahead, especially as there are more than 81 reactors currently under construction or being upgraded around the world, with a 150 new reactors expected to be completed by the end of 2016.
Yet uranium prices languish, just as they have been doing since the Fukushima meltdown over a year ago. In that time Japan said it would slow nuclear use, increase nuclear use and just last month opened up two reactors. And electricity generation from nuclear power worldwide has now reached record levels. But since August 2011, the uranium spot price hasn’t even moved a dollar.
Uranium supply levels are down, but so is demand for the time being and that’s the problem. A uranium market report from Australian firm Resource Capital Research expects the spot price remain under pressure in the near term, pressured by the impact of reactor shutdowns and closures in Japan and Germany.
Thus, while there is admittedly little in the way of active supply into the spot market at present, Resource Capital still sees the potential for utility surplus dispositions. The report also notes that spot market prices are also being impacted by ongoing Japanese renegotiation of delivery contracts for surplus supply.
This leads Resource Capital to expect a quiet spot market for the next six months, although some significant news of supply disruption in the meantime could generate some upward price pressure via producer on market purchases in order to meet delivery commitments.
In line with these views, the first week of July was a slow one in the spot uranium market. Both the Americans and Canadians celebrated their Independence Days, meaning a big chunk of the market spent a good part of the week away from their desks.
In the end, market consultants TradeTech reported only two transactions to the total of 200,000 pounds taking place. The consultant notes that buyers are staying out of the market for the most part, either due to a lack of requirement, budget constraints, or on hopes of a dip in prices given currently weak demand.
As a result, TradeTech’s Weekly U3O8 Spot Price Indicator was down US$0.15 to at US$50.60 per pound. Maybe there will be a bit more buying interest in September as the World Nuclear Association Annual Symposium in London approaches, hopes TradeTech.
If you though the spot market was quiet last week, then the term market was absolutely dead. TradeTech reported zero new demand and not one transactions in either the mid or long-term markets. However, there was talk that one non-US utility will start looking for significant quantities in the coming weeks. The mid-term and long-term prices stood pat at US$54.50 and US$61.00 respectively.
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