Commodities | Jul 31 2012
By Andrew Nelson
While spot prices continue to falter, many in the market are growing increasingly upbeat about the prospect for uranium prices and the share prices of producers. On top of traditional users like the US, Japan and Europe, there is an increasing amount of ongoing nuclear plant construction across emerging markets and in Southeast Asia.
At the same time, China has embarked on a huge planning and construction program and Japan’s sleeping reactors are slowly coming back on-line. Yet mid to long term prices haven’t budged in months and the spot price continues to slowly trickle lower.
Over the past year it seems the he spot uranium market has been bouncing off a bottom in the neighborhood of US$50/lb. It has tried a few times to push a little higher and between the spurts it has dropped a little lower on occasion. It seems that for the best part of the last year, there are few buyers at spot prices over US$50/lb and few sellers below that mark.
Canadian research house Raymond James has just jumped back into the uranium market and after looking at the ups and downs of both the demand and supply sides, the company predicts the spot uranium price will begin to move up again late this year and into 2013. Analysts are penciling in US$70/lb once we reach an expected global supply deficit in 2014-16.
Raymond James expects to see an average US$53.50/lb spot uranium price for 2012, which implies some limited upside from current levels. Spot prices should then increase to US$63.00/lb in 2013, US$72.50/lb in 2014 and US$75.00/lb in 2015.
For long-term investors, the increased levels of activity in the nuclear energy space and the growing amount of optimism in the broker/analyst space could well be pointing to a nuclear renaissance of even greater proportions than optimistically forecast. One day.
In the mean time, we’re still stuck with sluggish demand, a widening gap between buyers and sellers and spot prices that have really gone nowhere for the best part of a year.
Last week was not much different than the weeks and months prior. Industry consultant TradeTech reported just two sales comprising 400,000 pounds over the week. That makes it 8 straight weeks that transaction volumes have been below 500,000 pounds, with annual year-to-date volume now lagging 2011 volumes by 13 million pounds.
Reluctant sellers finally gave in and dropped offer prices over the course of last week in an effort to close some deals, but the move ultimately saw buyers drop bid prices and back away from the market. TradeTech’s Weekly U3O8 Spot Price Indictor slipped another US$0.25 to US$49.75 per pound, making it the first time the price has fallen below US$50.00 per pound since September 1, 2011.
TradeTech notes the majority of sellers are convinced that the spot price must be near its bottom and that buyers will almost have to emerge in coming weeks. This is especially so given the US$50.00 spot price barrier has been broken. Yet while the consultant notes anecdotal evidence of emerging interest and a number of new potential buyers sniffing around, there was still no new official demand as yet.
There was a bit of new speculative demand noted in the term markets, but no sales were conducted. TradeTech’s mid and long-term price indicators remained unchanged at US$54.50 and US$61.00 respectively.
For a more in-depth profile of the current dynamics of the uranium and nuclear energy markets, see Uranium Price Upside Ahead,
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