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Uranium Week: Some Hope?

Weekly Reports | Dec 13 2016

The spot uranium finally enjoyed a small bounce last week.

By Greg Peel

This report last week highlighted the landmark ruling by the Illinois state legislature to provide subsidies to nuclear energy, thus bringing the cost of nuclear-generated electricity in line with subsidised alternate energy sources and cheap natural gas-fired generation. The new bill means electricity producer Exelon will not now shut down its Clinton and Quad City reactors.

The bill has been some time coming, and potentially represents a turning point for US nuclear energy. Without subsidies, which recognise nuclear energy as “green” alongside renewables and as opposed to natgas, the US nuclear fleet would be commencing a drawn out process of shutting down due to a lack of commercial viability. This would mean, to some extent, that the growth of China’s nuclear fleet, which is almost a sole driver of demand-side growth in future years, would be negated by the reduction of capacity within the world’s largest producer of nuclear energy.

While the uranium industry has waited to learn the outcome in Illinois, there has been much talk of utilities being ready to start buying uranium at prevailing low prices. But they have been holding off until the result was known. Last week, therefore, saw five utilities enter the spot and term markets, industry consultant TradeTech reports.

By week’s end, five transactions were reported in the spot market totalling one million pounds U3O8 equivalent. A little more eagerness from the buy-side meant that after dropping like a stone for several weeks, TradeTech’s weekly spot price indicator actually rose US$1.00 to US$18.75/lb.

But every silver lining has a cloud. Despite the Illinois ruling, US electricity provider Entergy announced last week it would shut down its Palisades plant in Michigan in an effort to reduce the company’s fleet in a climate of low wholesale electricity prices.

While no transactions were reported in term markets last week, utilities are currently considering delivery contract offers. TradeTech’s term price indicators remain unchanged at US$19.00/lb (mid) and US$34.00/lb (long).

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