Commodities | Jul 09 2013
– Slim volumes reported
– No changes to prices
– US DOE adds more uncertainty
– Macquarie sceptical about Japan restart bump
By Andrew Nelson
Last week was slow and quiet in the uranium market. Industry consultant TradeTech reports just three transaction were concluded accounting for about 500,000 pounds of stock. As usual, the sellers were made up of producers and traders, while the buy side consisted of utilities and intermediaries.
The quiet market can be mostly attributed to the Fourth of July holiday in the US on Thursday which for most in financial markets was extended to a long weekend. The spot price ended last week unchanged at US$39.55/lb.
Yet despite the slow week and thin trade, there was news that could well shape the market over the longer term. The US Department of Energy (DOE) put out an eagerly awaited update to its 2008 Uranium Inventory Management Plan. Unfortunately, the document many had hoped would provide some clarity and comfort instead raised far more questions than were answered.
TradeTech notes that the original plan in 2008 laid out a guideline that inventory transfers should not exceed 10% of total US annual fuel requirements. More importantly, such transfers could not be undertaken if they were expected to have a materially adverse impact on the US uranium mining, conversion, or enrichment industries.
The update, admittedly packed with five years worth of fresh insight, holds the DOE can reach its uranium sales and transfer targets without the need for such a guideline, thus the 10% rule will no longer apply. The move leaves lingering uncertainty in its wake given there is no clear indication of the quantities and time frames for introducing material into the uranium market over the longer term.
There was another piece of not so good news, with analysts at Macquarie throwing a wet blanket on the Japanese Reactor Restart party. There has been increasing talk about Japan restarting its nuclear fleet and much speculation about what this will mean for uranium prices. The consensus has been that the move will put a floor under prices from which they can rise, probably next year. Macquarie is a little more cautious.
The new safety requirements will kick in today and it is admittedly a key step in getting the fleet back up and running. There are also already a reported 14 plants ready to put in their paperwork. But will we see any sort of boost demand, or at least enough to get the spot price moving any time soon?
Macquarie says no.
The positive takeaway is that the broker does see only limited downside price risks remaining, but it also points out that we won’t really be seeing any restarts before the year-end. And once the switches do get flicked back on, the current Japanese uranium stocks can easily cover initial requirements for all 14 of those reactors, broker notes.
There will still be a price recovery, there must be at some point. However, the broker sees a much slower recovery in prices than many of its more optimistic peers are anticipating. Macquarie’s 2014 price forecast is currently sitting at US$52.5/lb, 8% below market consensus.
There were a few signs of life in the term market last week. TradeTech reports that one producer said it had booked a multi-year deal for the supply of 200,000-300,000 pounds of U3O8 per year from 2017. A number of US and non-US utilities are also expected to enter the long-term uranium any day now.
Despite the signs of life, there was no change to TradeTech’s Mid-Term U3O8 Price Indicator, which was flat at $43.00/lb. The Long-Term Price Indicator stayed put at US$57.00.
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