Commodities | Jun 18 2013
– Spot price up 10c
– Still below US$40
– Japan may still come to the rescue
By Andrew Nelson
Last week was a slow one on the uranium market, with many participants attending the World Nuclear Fuel Market conference in Turkey. While they might have picked a more restive city than Istanbul, talk was upbeat about the shift from the established nuclear power markets of Europe and North America to the growing markets of Asia.
Industry consultant TradeTech reports just four transactions last week, accounting for just over 400,000 pounds of uranium. This saw the Weekly U3O8 Spot Price Indicator pick up US10c to US$39.85/lb.
There is an increasing amount of slowly emerging demand in the term market and it could end up helping to push spot prices higher. But it hasn’t to date. The drop below US$40 has started to pull in a few discretionary buyers, but they remain especially price sensitive and TradeTech fears a price above US$40/lb will scare many of them off.
Thus we are left with the exact same quandary that has been facing the market for the past few years, one where suppliers don’t want to drop prices any further, while buyers want cheap stock with longer dated deliveries. This would seem to underscore the oft discussed assertion that there is still sufficient supply and stockpiled material to see producers through at least the near term.
Three new non-US utilities entered the mid-term market last week looking for a combined 3.5m pounds or so for delivery out as far as 2020. There were also two non-US utilities still in the market, shopping for 4.5m pounds out to 2020.
But aside from the window shopping, not much else happened in the term market seeing TradeTech’s Mid-Term U3O8Price Indicator stay put at US $44.00/lb, while the Long-Term Price Indicator holding firm at US$57.00/lb.
TradeTech does expect to see some new demand in coming months, with talk that a number of US and non-US utilities will need to start thinking about entering the term market. Requests for proposals are expected in the next couple of months.
There is one ray of sunshine attracting the hopes of uranium sellers and it is the growing belief that Japan and going to have to turn the nuclear energy back on and soon if they have any chance of maintaining their fledgling economic recovery.
Before Fukushima, nuclear provided about 30% of the nation’s electricity and if the country wants to rack up a massive trade imbalance via the increasing importation fossil fuels, they are going about it the right way.
This is the double edged sword of Abenomics at work. The yen fell by nearly 19% in May and while this makes Japanese exports more affordable, it drives up fossil fuel import prices. Academic Ulrike Schaede wrote in Bloomberg recently that Japan is already running up a whopping trade imbalance by importing energy.
“Looking just at the four biggest categories (oil, liquefied natural gas, coal and liquefied propane gas), the monthly value of Japan’s energy imports jumped from 1.4 trillion yen (before March 2010) to 2.2 trillion in March 2013. In March, that was about $17 billion; now add 20% in exchange-rate shifts to get $22 billion per month,” she wrote.
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