Commodities | Nov 06 2012
By Greg Peel
Despite a widely held belief of commodities analysts that the global demand-supply balance for uranium into the medium term points to higher prices, spot uranium has continued to slide away on lack of genuine buying interest, dragging medium and longer term price indicators down with it. Spot uranium endured its worst month in October since March 2011, in the wake of Fukushima.
Since Fukushima, commentators had come to assume US$50/lb provided a floor level for spot pricing, below which genuine consumers (utilities) are happy to accumulate inventories. However these past couple of months those utilities are missing in action, while those on the supply side needing to sell (mostly traders and speculators) have become increasingly anxious. To that end, light interest on the buy-side has allowed the spot price to tumble 13% over the course of October, down US$5.50 to US$41.00/lb by October 31. Only 5.4mlbs traded hands in 29 transactions, notes industry consultant TradeTech, as buyers continued to back off.
The good news is that buyers did finally emerge right at the end of the month, perhaps seeing US$41 as the new US$50. As soon as they did, it was the sellers' turn to back off. Yet at month end it all went quiet again, such that TradeTech has dropped its spot price indicator for the week ending last Friday to US$40.75/lb, down US50c from a week earlier. Seven transactions were recorded for the week totalling 1.2mlbs.
Demand also weakened for mid-term contracts over October, with one deal transacted as Paladin Energy ((PDN)) sealed a large offtake deal with Eletrice de France. The impact of a plunging spot price has been felt in the mid-term market, such that TradeTech has dropped its mid-term price indicator by US$5.25 to US$45.00/lb. TradeTech has also subsequently moved its long-term price indicator down US$2.00 to US$59.00/lb.
Commodities analysts can rustle up a string of legitimate arguments as to why uranium prices should be trending higher. One day they might – maybe evenly rapidly – but not just yet it would seem.
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