Commodities | May 03 2016
By Greg Peel
The announcement from Canadian uranium producer Cameco that it would be shuttering its Rabbit Lake mine, thereby withdrawing 5mlbs of material from the market, continued to reverberate early last week. But after an initial flurry of activity, buyers retreated to the sidelines once more as sellers lifted their offer prices, industry consultant TradeTech reports.
Participants also await settlement of various mid and long term contracts currently out to tender to provide some fresh price direction.
The week ended with 700,000lbs U3O8 equivalent having changed hands in the spot market, down from one million pounds the week before. TradeTech’s weekly spot price indicator fell US10c to US$27.50/lb and remained at that level for the end of April.
The month of April saw 27 transactions concluded in the spot market for a total of 2.8mlbs U3O8. It was a wild month, in which the spot uranium price plunged to an eleven year low of US$25.50/lb before rebounding sharply on Cameco’s and other production curtailment announcements.
April saw all of buyers, speculators and producers active on the buy-side but traders dominated both buying and selling, TradeTech notes. The consultant’s spot price indicator of US$27.50/lb for end-April is down US75c from end-March.
Six transactions were concluded in term markets in April, but only for the modest total of 1.4mlbs. TradeTech has reduced its term price indicators to US$29.25/lb mid-term, down from US$29.90 at end-March, and US$42.00/lb long-term, down from US$43.00.
Cantor Fitzgerald notes the average March quarter spot uranium price was lower than forecast given a lack of buying from utilities, who are only buying small volumes in an oversupplied spot market rather than securing contracts for the inventory they will need to cover their requirements going forward. Eventually utilities will have to make a move, Cantor believes.
With Cameco now joining many others in curtailing production, Kazakhstan shifting material into a uranium fund in anticipation of higher prices, and Japan restarting reactors, Cantor is assuming a "violent" move upwards in uranium prices must soon occur as utility buying becomes more urgent and supply becomes more scarce.
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