Here Come The Uranium Buyers

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By Andrew Nelson

Uranium trading two weeks back saw the spot price plummet 5%, with increasingly cash poor and panicky sellers doing what they could to generate some volume. Last week was a little calmer and much busier, with buyers jumping in to take advantage of the rock bottom prices.

One could easily assume the calmer atmosphere last week had something to do with burned out market participants taking a working holiday in Florida to attend the International Uranium Fuel Seminar. And looking at the guest list it was obvious that the sellers were there in force. But the buyers; they we’re hanging out at the spot market, or so it seemed.

Industry consultant TradeTech reports that spot transaction volume surged last week, with just one non-US utility picking a preferred supplier for delivery of 1.8 million pounds U308 in enriched uranium product. If that wasn’t enough, there were still another four deals to be tallied, with market volume for the week adding up to 2.3 million pounds.

The sellers were, as always, producers and traders, with utilities and traders on the other side of the table. However, after the dust settled, demand levels were right back to where they were before: weak.

Maybe, just maybe, an inflexion point has been reached. While the majority of buyers are still hanging out for prices to drift even lower, it seemed that sellers last week finally started to hold firm, emboldened by the possible upswing in demand, and ceased to offer lower prices.

Also lending a bit of extra resolve to the sell side was news from China last week, with the nation’s central government drafting a US$12 billion plan to boost safety in the nuclear industry. TradeTech notes the preponderance of analyst commentary on the topic indicates the move should help pave the way for more nuclear plants to be built in China.

By the end of last week, TradeTech’s Weekly U3O8 was unchanged at US$43.50/lb.

The term uranium market was a different beast altogether last week. That is if you can call no transactions and no new demand a beast. There is one utility and two non-utilities out there kicking tyres, but by Friday, TradeTech’s weekly Mid-Term and Long-Term Price Indicators were flat at US$50.25/lb and US$61.00/lb respectively.

In other news, the loss of potential Australian uranium supply from BHP Billiton's ((BHP)) shelving of its giant Olympic Dam expansion project is being countered to some extent by the easing of government policy elsewhere in the country. In light of the federal government's decision to overturn a ban on uranium sales to India — a non-signatory to the Nuclear Non-Proliferation Treaty — the recently elected state government in Queensland has decided to overturn the 30-year state ban on uranium mining. Queensland's move mirrors a similar decision earlier by the Western Australian government, and a lifting of the ban on uranium exploration in New South Wales in February. In each state, Coalition state governments have replaced Labor governments over the past couple of years.

The news is heartening for significant Australian-based uranium miner Paladin Energy ((PDN)), which has sat on substantial Queensland deposits acquired through the takeover of Summit Resources some years ago, and which offer a balance to Paladin's Namibia-based operations.
 

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