Commodities | Jun 11 2013
– Uranium spot price falls below US$40/lb
– Spot market slow
– Activity, but no sales in term markets
– Probably more of the same until July
By Andrew Nelson
Stubborn uranium sellers have been holding off speculative buyers for a while now, unwilling to drop prices to get deals done. Consumers, on the other hand, have little short term requirement and many are out there cherry picking the market. That has been the way of things for quite a while now, that is until last week.
There were only four sales booked in the spot market last week, which saw 500,000 pounds of U308 change hands. More importantly, sellers finally started to buckle in their resolve and in turn, the spot price fell below what has been key psychological support at US$40/lb. This is the first time we’ve seen sub 40 price since March 2006.
Industry consultant TradeTech’s Weekly U3O8 Spot Price Indicator was only down US$0.65/lb, but with the price dropping to US$39.75/lb, one wonders whether the drop, at least in psychological terms, will turn into something much greater. US$40 has been tested time and time again, and now it’s finally been broken.
TradeTech reports that current spot demand remains thin and the only way to conclude deals at the moment is to drop prices, grin and bear it. There is a little ray of sunshine in that one non-US utility has finished looking at offers for over 500 thousand pounds, with a supplier soon to be named. The price from this transaction will be highly anticipated.
A number of utilities entered the term market last week looking for material further down the track. A total of four non-US utilities are looking for a combined 7.4m pounds of uranium for delivery from 2014 out to 2020. There are also several US and non-US utilities that are expected to solicit proposals over the next few months.
Despite the new term demand, no new transactions were concluded, leaving TradeTech’s Mid-Term U3O8 Price Indicator at US$44.00/lb, while the Long-Term Price Indicator was flat at US$57.00/lb.
There are still a number of analysts out there spruiking “the supply is running short of demand so the price must lift someday” message. Industry website uraniuminvestingnews.com recently spoke to Rob Chang, a metals and mining analyst at Cantor Fitzgerald and he’s on the same page.
“Looking out over the longer term there is still a fundamental supply/demand gap. That gap is soon to be made worse by the current price environment, which will certainly not support new projects — it’s not even incentivizing producers,” said Chang.
Chang sees the chance of a price catalyst emerging from Japan’s new nuclear safety regulations due out in July, noting that according to Cameco, three are Japanese utilities looking to submit restart applications in mid-July. This means there could be somewhere between five to eight reactors turned on this year
“There is also word that at least two other utilities may also submit applications quickly following the July introduction of regulations, bringing the total to five utilities,” said Chang. In the meantime, we’ll all have to sit back and wait.
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