Commodities | Jun 21 2016
By Greg Peel
In 2015 the uranium market was focused on supply, as mines across the globe shut down operations and new supply projects were shelved awaiting a future improvement in the uranium price. Long expected price support from the demand side – the restart of Japan’s reactors – was a long time coming.
In 2016 supply curtailments continued but none were able to spark any life into the uranium price. Japan has managed to only restart two of the country’s 50-odd reactors. As the end of the first half approaches, the spot uranium price has fallen 24% year to date and 10% in a month.
Still reeling from the planned shutdown of three Exelon reactors, the uranium market was further spooked last week by the announced shutdown of a fourth US reactor, at Fort Calhoun. The decision was prompted by the final version of the US Clean Power Plan. Original drafts of the environmental legislation offered credits for nuclear power plants given they do not omit greenhouse gases, but the final version has omitted such credits.
Ongoing operation of the Fort Calhoun plant has thus been deemed uneconomic. The US shutdown count has now risen to four but industry observers suggest 15-20 reactors could be shut down over the next several years.
The demand-side news did not get any better on the other side of the Pacific. Units 3 and 4 of the Takahama plant in Japan have been approved for restart from a safety perspective, but last week the local court upheld an injunction keeping the reactors offline. Kansai Power Co has mounted a legal challenge to the injunction and hopes to have the units restarted in the next couple of months.
There is little doubt the US and Japanese news had a negative impact on uranium market sentiment last week, industry consultant TradeTech suggests. Fresh urgency from sellers had buyers backing off, sending prices lower as the week progressed. Nine transactions were ultimately completed totalling 850,000lbs U3O8 equivalent.
TradeTech’s weekly spot price indicator has fallen US$2.00 or 7% to US$26.00/lb.
The most recent peak in the spot price was US$37.75/lb, marked in October last year. The recent low was seen in April this year at US$25.50/lb. The previous low of US$24.00/lb was marked in April 2005.
One small transaction was reported in the mid-term market last week. TradeTech’s term price indicators remain unchanged at US$29.00/lb (mid) and US$41.00/lb (long).
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