Uranium Week: Spot Price Soars Sixteen Percent

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This story features PALADIN ENERGY LIMITED.
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The company is included in ASX200, ASX300 and ALL-ORDS

By Greg Peel

For a few weeks now, nuclear industry consultant TradeTech has been anticipating that demand from utilities – the true end-users of uranium – would rise before year-end. Utilities had re-entered the spot market back in September as prices started to sneak up, until a 10% surge in one week led to a back-down as sellers raised their offer prices. Between then and now, intermediaries and speculators have dominated the demand-side, ensuring any pullback utilities may have been hoping for has not eventuated. With year-end now in sight, last week those utilities blinked.

One is reminded of Olympic sprint cycling, in which competitors slowing circle the velodrome feigning disinterest until one suddenly makes a break for the line and the other must follow. When at least one utility moved, its peers, and intermediaries, and speculators, ploughed in as well. Less than 900,000lbs of U3O8 changed hands over the course of the week, TradeTech reports, but at successively higher daily prices. Urgency became an issue, with at least one buyer seeking material for delivery as early as December first.

When the dust settled at week’s end, TradeTech’s spot price indicator had risen US$5.75, or a whopping 15.8%, to US$42.00/lb. It’s the second largest weekly jump in percentage terms since 1996, when the consultant began keeping score.

The scene had been set for a burst of activity. The week before, local government approval was received for Japan’s first two reactor restarts, three years and ten months after the Fukushima disaster. Interest from uranium traders and financial entities had been quietly building. Activity in the term contract market had been picking up, to the point Trade Tech raised its mid-term price indicator another dollar. The consultant had forewarned of increased term interest spilling into the spot market.

In July, the uranium spot price hit its post-Fukushima nadir at US$28.10/lb. It has now bounced 49% in less than four months. If utilities are now scrambling to secure supply before year-end, there may be further to run in the short term, but at some point prices will rise to the point idled capacity – with Paladin Energy’s ((PDN)) Kayekeleera mine in Malawi being just one example – will be brought back on line, one presumes, balancing supply against rekindled demand.

TradeTech’s term price indicators remain unchanged at US$38.75/lb (mid) and US$45.00/lb (long).

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