Weekly Reports | Oct 30 2018
Producer buying appears to be becoming more urgent as spot uranium hits a two and a half year high.
-Producer buying continues
-Prices continue to rise
-Utilities weighing up the situation
By Greg Peel
Producers of uranium again moved into the spot market early last week, prompting sellers to back off. Producers are meant to be sellers, but have shut down loss-making production and turned to the spot market to fulfill delivery contract obligations. Producer buying has become more prevalent as 2018 has progressed.
Producers have been buying in the spot market as for many it is cheaper to do so than to actually produce. But how long can this last? The spot uranium price has now risen 58% off its December 2016 low.
At some point, assuming the trend continues, the spot uranium price must begin to come into line with the cost of production, which varies from mine to mine, enticing idled mines to be restarted. Presumably if restarts become common, uranium prices must adjust accordingly. But for now, producers are still buying.
A sense of urgency possibly reflects the fact producers have not been the only buyers of late. Speculators have moved into the market, in the form of listed investment funds which primarily buy large amounts of uranium from major producers, such as Kazakhstan. Producers and speculators have been jumping over each other.
But what of utilities? They are, in the end, the actual consumers of the product. For years utilities failed to exploit historically low uranium prices in any volume, largely because they were already holding sufficient stockpiles. As prices began to rise, and presumably stockpiles fall, utilities started to become interested again, but here there was certainly no sense of urgency.
On industry consultant TradeTech’s observation, utilities are quietly making off-market inquiries in an effort to test the market and gather additional market intelligence to assess the depth of supply and the best time for making purchases. Are they waiting for the pullback?
What’s the Plan?
And the obvious question is, are producers becoming more urgent on the buy-side because prices are rising and contracts need to be filled, or is this all part of the plan? Higher prices are in the producers’ interest.
Curiouser and curiouser. What we do know is 600,000lbs U3O8 equivalent changed hands in the spot market last week, and TradeTech’s weekly spot price indicator rose another US30c to US$28.00/lb.
The spot price has risen 18% year to date, and 41% in twelve months.
No transactions were reported in term markets last week, although sizeable tenders are out for delivery contracts and being evaluated by the utilities in question.
TradeTech’s term price indicators remain at US$30.00/lb (mid) and US$32.00/lb (long).
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