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Uranium Week: Volume Picks Up

Weekly Reports | Feb 07 2017

The uranium spot market appears to now be feeding on itself as stronger prices lead to increasing interest.

By Greg Peel

Due to an extended delay in restarting its reactor fleet – the fifth anniversary of Fukushima is next month – Tokyo Electric Power Company has cited force majeure in terminating its long term uranium supply contract with Canada’s Cameco. Cameco will mount a legal challenge.

The termination offers up a risk that uranium otherwise destined for TEPCO inventories will now hit the market instead, weighing on prices. But the market has brushed aside such a risk, at least for now.

Momentum Is Up

Momentum has been building on 2017 in spot prices and last week saw that continue, on increasing volume.

Last week marked the end of January and industry consultant TradeTech reports twenty spot transactions were concluded over the month totalling 2.5mlbs U3O8 equivalent. TradeTech’s spot price indicator rose US$4.25 over the month to US$24.50/lb.

On a week-on-week basis, the consultant’s price indicator is up US$1.00 to US$25.50/lb at week’s end. A further ten spot transactions were concluded in the first three days of February totalling 1.5mlbs U3O8 equivalent.

These volumes are a far cry from the tepid numbers reported as 2016 came to a close, when the spot price bottomed out at a twelve-year low US$17.75/lb. Since that time, the spot price has rebounded 44%. Intermediaries and speculators, who spent most of 2016 trying desperately to offload their positions, have been active in the mix this year alongside producers and actual end-users.

Demand From Asia

On the demand side of the equation, TradeTech notes there are 60 reactors currently under construction worldwide, two-thirds of which are in Asia. Asian nuclear programs are largely driven by the desire to reduce carbon emissions and improve air quality.

On the supply side, 2016 saw many a uranium producer curtail production through mine shutdowns, temporary or otherwise. The greatest supply-side impact has been delivered by Kazakhstan, in announcing a -10% cut to annual production.

In most cases, supply has been curtailed, not removed. The spot price rally underway is being supported by tight supply. Many operating mines are still burning cash at current pricing despite this year’s rebound, but if the rebound continues it’s only a matter of time before idled supply starts coming back on line. See: US shale oil.

There were three transactions concluded in the term uranium markets late last week, TradeTech reports, for reasonable volumes. As demand picks up and prices rise, the consultant has adjusted its end-month term price indicators accordingly.

The mid-term indicator has risen US$5.75 to US$27.75/lb. The long-term indicator has risen US$5.00 to US$35.00/lb.

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