Commodities | Nov 10 2015
By Greg Peel
Last week saw President Obama draw the ire of the US oil industry by deciding not to approve the Keystone pipeline, which would carry oil from Canada right through to US Gulf refineries ahead of potential export to Asia and other markets. Environmental concerns, with an underlying climate change tone, were the major reason provided but US energy security and domestic pricing were also considerations.
The climate change theme is nevertheless working in the other direction for the US nuclear energy industry. As some of the country’s smaller and older reactors begin to struggle with economics, Obama has announced he is enacting steps to ensure nuclear energy remains an important component of the US Clean Energy Strategy. The Administration will offer support to a variety of nuclear research and development initiatives.
Meanwhile over in India, the government last week pared back its own nuclear energy ambitions, readjusting projected nuclear capacity forecasts to 14,500MW by 2024 from an earlier 63,000MW by 2032. India’s Department of Atomic Energy has qualified its reduction by insisting the initial target was more of an expression of intent than an actual forecast.
On the other hand, South Africa intends to move forward with the construction of new nuclear plants that could add up to 9,600MW in power capacity and in the UK, the government has approved the construction of a third reactor at the existing Heysham facility as part of that country’s push to renew and expand longstanding nuclear capacity.
Nuclear power industry talk in the post-Fukushima era has been dominated by not only Japan restart speculation, but of the potential demise of nuclear energy as a base power source across parts of Europe. Yet as analysts at Macquarie note, nuclear power has in fact been making a quiet global comeback. The Fukushima disaster of 2011 saw many plants shut down and expansion plans either delayed or shelved but the past two years have seen consistent year on year growth, Macquarie points out.
Total 2015 nuclear output is set to be the strongest since 2011 and despite ongoing downside risks in the West, the analysts believe capacity growth in Asia will ensure this trend continues on a five-year view, thus ensuring rising demand for uranium.
Such developments nevertheless remain far removed from the uranium spot market in the shorter term. Current action in that market comes down to long-awaited utility buying interest. Last week finally saw utilities come in to join intermediaries on the buy side after a period in which only intermediaries and traders were offering any market support.
A total of 750,000lbs U3O8 equivalent changed hands in the spot market last week, industry consultant TradeTech reports. The reappearance of end-users encouraged sellers to back off slightly, such that TradeTech’s weekly spot price indicator closed up US25c at US$36.00/lb.
Four transactions were reported in the term markets last week totalling 14mlbs for delivery over 2018-25, TradeTech notes. Utilities were the buyers in each case. Other utilities have entered the market seeking contract interest but in the meantime, TradeTech’s term price indicators remain unchanged at US$38.75/lb (mid) and US$44.00/lb (long).
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