Commodities | Jul 17 2012
By Andrew Nelson
Last week was another slightly down-week for uranium spot prices, with industry consultant TradeTech reporting just three transactions taking place. Total volume on the spot market was 400,000 pounds, with little activity in either the supply or demand side.
TradeTech notes the lack of any sort of firm demand is continuing to place downward pressure on spot prices. Sellers, for the most part, just don’t want to cut their prices and buyers remain speculative in nature. This is a continuation of the prevalent trend over recent months and means the gap between willing sellers and buyers is continuing to increase.
Based on TradeTech’s assessment of the level at which it assumes a willing buyer and willing seller would do a deal, it’s Weekly U3O8 Spot Price Indicator finished last week at US$50.25 per pound, down US$0.35 from the previous week’s value.
Making the situation worse is news that Honeywell will not restart production at its Metropolis Works conversion facility until getting a green light from the US Nuclear Regulatory Commission about necessary safety upgrades.
While the news introduces new uncertainty into an already uncertain market, TradeTech notes that some in the market are hoping the news will actually translate into some upward price pressure not only on the conversion market, but also on the spot market as well. This could well be the case depending on how long Metropolis remains closed and how fast existing UF6 supply is taken up.
There is slightly better news from the mid- and long-term markets, with signs of new demand emerging. TradeTech is expecting to see some significant increases in the third and fourth quarters, which it notes has reinforced the hopes of some sellers that prices may being to strengthen.
But not yet. TradeTech’s Mid-Term and Long-Term U3O8 Price Indicators remained unchanged last week at US$54.50 and US$61.00 per pound.
With Japan off the nuclear radar for most of last year and Germany reducing nuclear generated power by 23%, there has understandably been an impact on uranium prices. Yet with worldwide nuclear power use down by 4% from last year, spot prices have at least remained steady. A recent report from Scotiabank notes these issues and expects a rebound in 2013.
The report cites a few supporting factors, such as the looming expiration of the Megatons to Megawatts program between the United States and Russia. The program allows the US to convert highly-enriched uranium from Russian nuclear warheads to low-enriched uranium for nuclear fuel. The expiry is expected to remove 24 million pounds from the market.
China intends to restart its nuclear energy program after conducting some safety reviews, planning to build 100 reactors by 2030 and 197 by 2050. This news is also expected to lend some support to uranium prices over the longer term.
With demand for uranium projected to increase by 3% a year as the developed world demands more electricity and given the reduced amount of mined uranium, which is currently insufficient to keep up with demand, prices will have to start moving up again. One day.
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