Tag Archives: Uranium

article 3 months old

Uranium Week: Steadily Upward

By Greg Peel

The US Energy Information Agency reported last week total US-based production was 2.2mlbs in 2016, down -13% on 2015 and the lowest level since 2005. Currently there are six facilities operating in the US, with three on standby. Seven are in the planning/development stage as owners assess future conditions.

North of the border, Cameco reported a -US$47m loss for 2016, impacted by impairments from the shutdown of its Rabbit Lake mill and the full write-off its Kintyre project in Australia. Cameco also curtailed its ongoing production last year.

The global uranium industry is now at an interesting point.

In what industry consultant TradeTech describes as a “routine” week last week, six spot transactions were concluded totalling 800,000lbs U3O8 equivalent. Trade Tech’s weekly spot price indicator rose US$1.00 to US$26.50/lb.

While that price is still some -60% below pre-Fukushima levels, it is 49% above the December low. While production curtailments from the likes of Cameco and Australia’s Paladin Energy ((PDN)), operating in Africa, have helped to tighten the supply side, it is Kazakhstan’s decision to cut 2017 production by -10% that is providing ongoing price support, TradeTech suggests.

Which begs the obvious question. While a level of global production has been shut down for good and planned developments have been abandoned, most of the incumbent players, including Kazakhstan’s state-owned miner, have simply put operations into care and maintenance or reduced output levels, pending a return to economically viable prices. If the uranium price continues to rise, each project will pass its trigger point at which management will consider production restarts or increases.

And then the price will fall again, if there is no corresponding increase in demand. It is the perennial commodity market dilemma – higher prices eventually lead to increased production which leads to lower prices which leads to reduced production…

Aside from the possibility of legacy US reactors being saved from shutting down thanks to supportive legislation changes, China has now passed its peak in stockpiling (at low prices) for its reactor building program, Japanese reactor restarts will be held up in court from here to eternity, and programs in the likes of India and South Africa while supportive, are a long way off. Meanwhile, governments in Europe are moving away from nuclear energy.

In other words, the uranium price will most likely be supply-side dominated in 2017, and price-wise that implies a negative feedback loop.

There were no transactions reported in term markets last week. TradeTech’s term price indicators remain unchanged at US$27.75/lb (mid) and US$35.00/lb (long).

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Uranium Week: Volume Picks Up

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.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Uranium Week: Momentum Builds

The spot uranium price last week booked its eighth consecutive week of positive or neutral price changes.

By Greg Peel

Last week market participants gathered in Washington for the annual Nuclear Supply Forum, a week which typically ensures light trade on uranium markets.

But not this time. Industry consultant TradeTech reports seven transactions conducted in the spot market totalling 900,000lbs U3O8 equivalent. Prices rose steadily over the week, taking TradeTech’s weekly spot price indicator up US75c to US$24.50/lb – its highest price since last September.

Last week marked the eighth consecutive week of positive or neutral price changes. The spot uranium price is now 38% above its December low of US$17.75/lb. It sounds impressive, but we really are coming off a very low base. A twelve-year low to be precise.

Positive momentum is being carried, TradeTech suggests, since Kazakhstan announced a 10% reduction in state production in 2017 earlier in the month, due to low prices. On the other side of the coin, the Husab Uranium Mine in Namibia – ten years in development – last week produced its first concentrate.

Husab production will not hit the spot market, given an agreement to exclusively supply majority shareholder China General Nuclear Power Co in 2017. While that’s good news, it also takes CGNC demand out of the equation.

BHP Billiton’s ((BHP)) December quarter production report, released last week, noted a 30% drop in uranium production at the company’s Olympic Dam mine in South Australia in the first half FY17. This was not a case of another major producer deciding to curtail production, but rather a result of maintenance work and South Australia’s infamous state-wide electricity blackout, that cut off supply to the mine for two weeks.

There were no transactions concluded in uranium term markets last week. TradeTech’s term price indicators remain unchanged at US$22.00/lb (mid) and US$30.00/lb (long).

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Uranium Week: There Can Only Be Upside

It appears 2017 may prove a brighter year for uranium, but it’s a very long way back.

By Greg Peel

This week sees the global Nuclear Fuel Suppliers Forum held in Washington, which typically slows down market activity given participants are absent. Last week saw only modest volumes traded in the spot market. Industry consultant TradeTech reports only four transactions totalling 600,000lbs U3O8 equivalent.

The good news is that TradTech’s weekly spot price indicator has risen, again, this time by US25c to US$22.75/lb. Indeed, since hitting a 12-year low of US$17.75/lb in December, the spot uranium price has rallied a healthy 24%.

Out of context, that sounds inspiring. In context, that’s a US$5/lb rally following a -34.5% price drop in 2016, or about -US$17/lb. The price of uranium, note the commodities analysts at Macquarie, is currently trading at 50% of its price of 40 years ago in nominal terms, before one even accounts for inflation.

Meanwhile, the price of uranium’s energy rivals – LNG and coal – surged back in 2016 following earlier tumbles. Uranium was the worst performing commodity in 2016. No other commodity is trading at 50% its nominal value of 40 years ago.

A Picture Of Weak Demand

Uranium has now suffered the same fate as oil/gas and coal suffered in 2015. With spot prices falling below the cost of marginal production, supply has been wound back. But not enough to make a significant dent in the global surplus. On the other side of the equation, 2016 featured weak demand.

In the US, demand is falling as legacy reactors are being shut down, due to their inability to compete commercially with alternative energy sources (gas, renewables) and despite the low cost of fuel. With Japanese reactor restarts moving at a barely discernible pace, the global demand burden falls on China, where a major reactor construction phase is underway.

The problem is, as prices have fallen steadily since the Fukushima disaster, China has been opportunistically stockpiling the uranium needed to fire up new reactors. While Chinese stocking continues, the peak rate of China’s inventory build is now past, Macquarie notes.

In Japan, there are now ten reactors out of a pre-Fukushima 40-odd that have satisfied new safety standards and are therefore restart-able. But as the fifth anniversary of Fukushima approaches, only three are currently operating (and one of those is actually down for maintenance as we speak), two more were restarted and then closed down again due to court injunctions (safety concerns at the local level), and the fate of the other five is in the hands of local governments, or “the people”, as it were, and as such unknown.

Too Much Supply, Still

On the supply side, last week saw major global producer, Canada’s Cameco, issue a profit warning due the intended write-down of the value its production assets. The company will also lay off 10% of its workforce. Last year Cameco idled its Rabbit Lake operations. Similar care & maintenance curtailments have been the story for Australia’s Paladin Energy ((PDN)) over 2016.

Yet Cameco’s Cigar Lake mine continues to ramp up, and the Husab mine in Namibia continues to ramp up, where Rio Tinto’s ((RIO)) Rossing mine is also expected to recover production levels. While 2017 should see the lowest level of uranium production since 2010, Macquarie notes, the 2% growth rate in demand required to keep reactors operating is not enough to mean a surplus will be avoided. Macquarie does not see a balanced market until at least 2020.

That said, Macquarie sees more upside potential for uranium prices in 2017 than downside – a view the analysts are not alone in taking. Outside of Chinese construction and Japanese restarts, one positive may be provided on the demand side if shutdown plans for legacy US reactors are reversed due to favourable state legislation.

TradeTech’s term price indicators remain unchanged at US$22/lb (mid) and US$30/lb (long).

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Uranium Week: Relief In 2017?

After suffering a substantial price collapse in 2016, uranium has begun 2017 in a slightly brighter mood.

By Greg Peel

Welcome to FNArena’s first Uranium Week report for 2017. Believe it or not, the uranium spot price has begun 2017 with two consecutive weekly gains.

In the first week of January industry consultant TradeTech’s weekly spot price indicator rose US$1.50 to US$21.75 and last week rose a further US75c to US$22.50/lb. Did we see the bottom at US$18/lb? On average, the spot price fell 0.7% each week of 2016.

One swallow…they say. But it is a generally held belief that uranium prices must eventually recover for the simple reason the spot price remains well below the average global cost of production, and way, way below the estimated incentive price for new production. With the demand side still impacted by the glacial restart of Japanese reactors, the closure of legacy US reactors, and a shift away from nuclear power in Europe, further supply-side curtailments and closures simply cannot be avoided for much longer.

Production Cuts

In Australia, uranium producer Paladin Energy ((PDN)) continues to burn cash at current prices, and has responded with curtailments and divestments. Energy Resources of Australia ((ERA)) is enjoying much stronger legacy contract pricing for its stockpiled ore but has its expansion program on indefinite hold. In Canada, world-leading producer Cameco has curtailed production.

The greatest resources of uranium lie in Kazakhstan where last week state-owned producer Kazatomprom surprised the market by announcing a 10% production cut in 2017 due to near term global oversupply. Meanwhile, another legacy US reactor will be closed in New York State after 40 years of service due to economic unviability. Demand-side growth all comes down to China in the near term and in the medium term, India and other emerging economies.

The Kazakhstan announcement helped to sustain upward momentum in the uranium spot price last week but measuredly so. Six transactions were concluded totalling 550,000lbs U3O8 equivalent, TradeTech reports.

There were no transactions reported in uranium term markets nor any fresh demand. TradeTech’s opening term price indicators for 2017 remain at US$22.00/lb (mid) and US$30.00/lb (long).

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Uranium Week: Post Illinois Momentum

The "landmark" decision to put uranium on equal footing with renewables, as far as government subsidies are concerned, by lawmakers in Illinois has injected renewed momentum into the spot uranium market, reports industry consultant TradeTech.

Illinois' "Future Energy Jobs Bill" is being described as a truly watershed event for the uranium market by TradeTech and others inside the industry.

The least we can conclude is that the ultra-bearishness overshadowing the uranium market throughout most of calendar 2016 has now been replaced with a more constructive view. On TradeTech's observation, both US utilities and intermediaries are stepping up, pulling their buying activity forward.

On Friday, TradeTech's weekly spot price indicator rose to US$20.25/lb, an increase of US$1.50 or 8% from the previous week. A total of 1.6 million pounds U3O8 equivalent were traded over the course of the week in 12 transactions.

The uptick in market activity has taken several sellers by surprise because usually this time of the year things quieten down. TradeTech's spot price temporarily reached as high as US$21/lb mid-week.

More positive news flowed from South Africa where state utility Eskom's intention is to reduce reliance on coal-fired power plants via the commissioning of new nuclear reactors.

TradeTech notes, in the term uranium market, one transaction is reported this week. A non-US utility, evaluating offers for 6.5 reloads of uranium contained in enriched uranium product (EUP), selected a preferred supplier.

The consultant's mid-term price indicator remains unchanged at US$19/lb, while its longer-term price indicator remains at US$34/lb.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Uranium Week: Some Hope?

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).

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Uranium Week: Still Falling

Supportive news on both the demand and sell sides has not prevented the uranium spot price falling further still.

By Greg Peel

While the US was taking a break for Thanksgiving and markets were largely unattended, the spot uranium price fell a further US75c to end November on a new low of US$17.75/lb, based on industry consultant TradeTech’s price indicator. That price was unchanged as of last week despite a reasonable level of activity.

TradeTech reports seven transactions in the spot market last week totalling one million pounds U3O8 equivalent. The dip under US$18/lb did encourage some buying interest from utilities and even producers were in buying at low prices, but still the trajectory remains to the south.

Weak market conditions have forced the world’s biggest corporate uranium producer, Canada’s Cameco, into offering its workers extended paid vacations in the upcoming northern summer of 2017. In order to reduce costs in the low price environment, Cameco will halt production at its MacArthur River and Cigar Lake mines and Key Lake processing mill for several weeks.

On the demand side, there was much relief when the State of Illinois passed a landmark energy bill which will make it commercially viable for energy provider Exelon to maintain operations at its Clinton and Quad City reactors. In short, the bill recognises nuclear energy as carbon-free, alongside subsidised alternative energy sources.

While restricted to Illinois, the bill should provide hope legacy reactors in other US states may not be forced into closure if other state legislatures follow Illinois’ lead.

But what has to happen to turn the uranium price around?

Two transactions were reported in the uranium term markets last week, each totalling less than 1mlbs U3O8 equivalent. TradeTech reports several utilities are currently evaluating term contracts but yet the consultant was once again forced to drop term price indicators at the end of last month.

The mid-term indicator has fallen US$1.50 to US$19.00/lb and the long-term indicator has fallen US1.00 to US$34.00/lb.

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Uranium Week: Stability Returns

For once the spot uranium price did not fall over the week. Has a bottom been found?

By Greg Peel

There was no Uranium Week report published by FNArena last week due to the Veterans Day holiday in the US. In that week the spot uranium price fell US25c to US$18.50/lb, following a US$1.00 fall the week before.

Last week saw 750,000lbs U308 equivalent change hands in the uranium spot market in five transactions, industry consultant TradeTech reports. The consultant’s weekly spot price indicator is unchanged at US$18.50/lb.

Is this the bottom? Having plunged in October it appears the spot price has stabilised in November. Yet we have seen levels of stability before, and brief rallies, only to be consistently disappointed.

So we’ll reserve judgement for now, but suffice to say utilities are showing interest in picking up material at these low levels despite most being in no desperate need to rebuild inventories, while sellers are becoming increasingly reluctant to drop offers ever lower, TradeTech notes. Perhaps the desperate among the trading fraternity capitulated in October, but there are still producers burning cash who must continue to find buyers and hope that, eventually, prices will recover.

In uranium market news, the same themes are continuing to play out. Last week’s news leant mostly to the positive.

The Chinese government has formally released a five-year plan confirming the intention to have 30mkW of new nuclear capacity going into operation and over 30mkW under construction. To 2020, capacity will increase by 16.5% per annum.

In the US, energy company Exelon awaits key legislative decisions that would allow and justify the company’s acquisition of the Fitzpatrick nuclear plant in New York State and justify the continuing operation of the company’s Clinton (appropriate) and Quad Cities plants in Illinois. The decisions are important as in the wider scale, they would either save or sound the longer term death knell for the largest nuclear energy industry on the planet.

The issue remains the same – older nuclear plants cannot compete against cheap natural gas-fired electricity generators and despite being “green”, do not enjoy the same subsidies afforded alternative energy sources. Legislation is required at both state and federal levels, hence the word “appropriate”. What will be the approach of the Trump administration and Republican-led Congress?

In Japan, two more reactors have now reached the point of satisfying post-Fukushima safety rules – the biggest hurdle in moving towards restart. Now comes the political process, beginning at local government level, which experience suggests is no clear path.

There was one small transaction concluded in the uranium mid-term market last week. TradeTech’s term price indicators remain unchanged at US$20.50/lb (mid) and $35.00/lb (long).

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.

article 3 months old

Uranium Week: Twelve-Year Low

The second weekly drop in 2016 in excess of 10% has spot uranium trading at its lowest level since 2004.

By Greg Peel

Uranium market participants were attending the annual International Uranium Fuel Seminar in Florida last week but unfortunately we cannot blame thin trade for another big plunge in the uranium spot price. Industry consultant TradeTech reports eight spot transactions totalling 1.2mlbs U3O8 equivalent.

That’s a heavy level of volume in 2016 terms. Sellers in the spot market believe there are buyers out there at lower levels and have been hoping to flush out utility interest by lowering prices. They may have found some buying interest last week but they are not preventing the spot price from falling ever further.

TradeTech’s weekly spot price indicator has fallen US$2.25, or 10.5% to US$20.00/lb, the lowest level since October 2004.

At the beginning of 2016, the uranium spot price stood at US$34.20/lb. It has now fallen 41.5% in almost ten months and is 70.5% lower than when a tsunami hit Fukushima in March 2011.

Sellers are still hanging on to the belief utility demand will pick up by year-end but on last week’s price movement, one would have to suggest their faith is being questioned. It is assumed growing interest in uranium spot term markets will translate through to better spot prices but quite clearly that’s just not happening yet.

There were no transactions reported in the term markets last week. TradeTech’s term price indicators remain at US$23.70/lb (mid) and US$37.00/lb (long).

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" - Warning this story contains unashamedly positive feedback on the service provided.