Commodities | Feb 04 2014
By Greg Peel
Last Friday was also the end of the month, hence industry consultant TradeTech’s uranium spot price indicator of US$35.40/lb on the day represents a US20c fall from the week before but a US90c increase from the end of December.
Activity picked up considerably in January compared to December, TradeTech notes, with a total of 3.7mlbs of U3O8 equivalent changing hands in 24 spot transactions compared to 2mlbs the month before.
Momentum up to mid-month was driven by supply-side impacts on the one hand, with production difficulties experienced in both Australia and Africa, and a demand-side impact on the other with the return of a large institutional buyer looking for offers for over one million pounds of U3O8. The buyer first appeared in the latter half of 2013 but withdrew unsatisfied when previously anxious sellers pulled back their prices. Once again it appears the buyer is not prepared to chase the market, hence momentum eased as the month wound to a close.
In the latter months of 2013, intermediaries were the prime source of selling, TradeTech notes, and appeared keen to offload unwanted inventory before year-end. In January however, producers were responsible for the majority of sales. There were also producers on the buy-side, likely looking to make up contract shortfalls, as well as intermediaries and actual consumers (utilities). The market also became fractured in January on a geographical basis – a not uncommon occurrence – resulting in buyers in Europe bidding above offer prices in North America. Last week saw 800,000lbs change hands in the spot market, almost all of it for North American delivery, TradeTech reports.
January also saw activity in the uranium term market, with three transactions reported. Utilities from both sides of the Atlantic selected suppliers for 2mlbs of U3O8 equivalent for 2014-20 delivery. The good news for those bullish the uranium spot price is a US$1.00 increase in TradeTech’s mid-term price indicator in January to US$38.50/lb. The consultant’s long-term price indicator remains unchanged at US$50.00/lb.
In other news, the South Korean government has approved the construction of two new reactors by 2020. Korea’s electricity supply has been restricted since the closure of a series of plants due to safety issues. Currently 23 reactors produce a third of the country’s electricity requirements but the government intends to cut that figure to 29% of total power supply by 2035, down from a previous 41% target.
China is also moving ahead on new reactor approvals, specifically with the ultimate aim of cutting coal consumption and improving air quality. Measures will be gradually introduced this year to promote the construction of plants in coastal areas (what could possibly go wrong?) while improving the safety of inland plants. China currently has 23 reactors in operation and another 28 under construction.
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