Commodities | Jan 29 2013
By Andrew Nelson
Last week was certainly a busier one in the uranium market, with nine deals done and nearly one million pounds of uranium changing hands. Certainly a big jump from the 400,000 pounds transacted the week before.
Despite the higher transaction levels, which tend to flatten out volatility a bit, industry consultant TradeTech reports that last week’s increased volume brought increased price volatility right along with it. Financial entities and traders made up the bulk of the buy side and were undeterred as prices started to shoot higher in the latter half of the week. Starving sellers were quick to seize the opportunity, raising offer prices as the week progressed.
However, once the now current spot price was breached, activity started to cool and prices started to come back off again. Despite this, the frantic activity earlier on spurred on a number of utilities to enter the market, although TradeTech notes the bulk of the buying was still done by traders and financials.
The volatility has left many scratching their heads about the motivation behind the sharp pick-up in buying activity. While there is a bit of talk about the political unrest in the West African nation of Mali, which has brought about a number of production cutbacks, TradeTech notes some believe that buyers are simply building a bit of stock to cover either previous delivery commitments, or in advance of some hoped for mid-term opportunities.
It’s a bit of both, says TradeTech. And given the consultant believes these issues will take more than a week or two to resolve, it sees a continuation of on and off price volatility as a realistic option going forward.
By the end of last week, TradeTech’s Weekly U308 Spot Price Indicator was at US$43.75/lb, up US$1.25 from the prior week’s, with US$0.50 of that added on Friday.
There was also a bit of life in the term uranium market, with some new demand entering in the form of a non-US utility looking for around 2.2m pounds for delivery between 2014 and 2020. TradeTech notes there are still a few other US and non-US utilities seeking over 10m pounds of stock out until 2025.
Despite the increased interest, the term price remained unchanged. TradeTech’s Mid-Term U308 Price Indicator stayed put at US$48.00/lb and the Long-Term Price Indicator held firm at US$57.00/lb.
There was a bit of good news for uranium sellers making the rounds of the on-line press last week. An article by moneymorning.com’s resources specialist Peter Krauth posits we may be reaching the end of this latest downward cycle in uranium prices.
In fact, Krauth expects the spot uranium price could rise as high as the US$70/lb range within the next 12-18 months. The presumption is based on an expected acceleration of the reactor restart program in Japan on the back of the newly elected, pro-nuclear government and the end of the end of the Megatons to Megawatts program later in the year. That’s the one where the US buys highly-enriched uranium from Russia’s decommissioned nuclear weapons.
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