By Greg Peel

In a quiet week in the spot uranium market, volume dropped to five transactions totalling 500,000lbs of U3O8 equivalent last week from 2.3mlbs the week before. Industry consultant TradeTech’s spot price indicator has risen by US10c to US$39.10/lb.

Four years ago last week the spot price was trading at US$67.50/lb before the Japanese earthquake struck. Three and a half years of price declines followed before it appeared the price may have bottomed out, reigniting some hope for uranium producers. But it remains some 42% below the pre-Fukushima level.

Utilities have spent most of the interim period drawing down on existing inventories. The Russian HEU program came to a close during the period but did not make as much of an impact on supply as had previously been anticipated. Many nations, particularly in Europe, have reassessed their nuclear energy aspirations in the wake of the Fukushima disaster while on the other hand, China has pressed inexorably forward with its goals to include nuclear as a significant part of its alternative energy mix.

Japan shut down 48 reactors in 2011. To date only two have been cleared for restart by both the safety regulator and by the local populace, and are expected to be restarted around June. Two more have been cleared by the regulator but remain to be approved by local residents. As to how many reactors Japan might ultimately restart at this point is unclear, but the excessive cost of replacement fossil fuel-fired electricity has hampered the country’s economic recovery efforts and attempts to reduce carbon emissions.

The nuclear energy landscape is a very different one today than it was in 2011. Much remains uncertain.

TradeTech’s term uranium prices remained unchanged last week at US$42.50/lb (mid) and US$50.00/lb (long).
 

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By Greg Peel

After a couple of weeks of low activity, in which buyers and sellers both seemed reluctant to move on price, volumes lifted significantly in the spot uranium market last week. Industry consultant TradeTech reports nine transactions completed totalling 2.3mlbs of U3O8 equivalent, although around half of the transactions involved sales of UF6.

That takes the 2014 year to date volume to 9.6mlbs of U3O8 equivalent, up from 6.7mlbs in the same period last year.

The market has been waiting for some sort of demand-side impact from recent supply-side issues, including operational problems at BHP Billiton ((BHP)) and Rio Tinto ((RIO)) mines and more recently, problems at the Azelik mine in Niger. To that end, buying interest was strong early in the week from both traders and utilities, but by week’s end buyers backed off from paying increasing prices. End-use demand remains discretionary, TradeTech notes, with no sign of pressure to buy at this time.

Prices were thus lower by week’s end than the earlier peak but TradeTech’s weekly spot price indicator is up US50c on the previous week to US$39.00/lb.

There were no transactions completed in the term market last week and TradeTech’s term price indicators remain steady at US$42.50/lb (mid) and US$50.00/lb (long).

It’s been a rocky road these past few years for Australian-listed uranium producer Paladin Energy ((PDN)). Having once enjoyed the benefits of sales at rising spot prices, when long established producers were stuck with legacy longer term contract pricing, the collapse in spot prices post-Fukushima proves what goes around, comes around, and Paladin was soon flying very close to the wind as it burned cash at too-low uranium prices.

Equity raisings and debt restructures have followed, and recent improvement in prices has led Paladin management to consider restarting the Kayelekeera mine in Malawi which the company had earlier been forced to place on care and maintenance. However, spot prices are not yet strong enough for Paladin to enjoy positive cash flow, and in a classic case of “can’t take a trick”, the company had just announced further balance sheet repair when a pre-leach thickener at the flagship Langer Heinrich mine in Namibia failed, forcing an 8-12 day shutdown.

Paladin thus expects a production loss of around 100,000lbs in the quarter and has reduced FY15 production guidance accordingly.

The gods are clearly not smiling on Australian-owned uranium production at present.
 

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By Greg Peel

The uranium spot market did finally see a response last week to the supply-side disruptions announced two weeks earlier, coincidently, by Australian listed producers BHP Billiton ((BHP)) and Rio Tinto ((RIO)). Six transactions totalling 600,000lbs of U3O8 equivalent were conducted, industry consultant TradeTech reports, and prices pushed higher through to week’s end before demand once again stalled.

TradeTech’s spot uranium price indicator finished the week up US40c at US$38.65/lb.

New demand did emerge in the spot market nevertheless, with one US utility seeking offers for 200,000lbs. One transaction was reported in the mid-term market but while there remains much interest in term contracts from utilities, many are looking to off-market direct transactions with suppliers in order not to fuel price rises in the open market.

This has not stopped TradeTech lifting its mid-term price indicator by US$1.25 to US$42.50/lb. The consultant’s long-term indicator remains unchanged at US$50.00/lb.

Last week also brought the end-of-month and TradeTech notes a total of 4.8mlbs of spot market transactions, up from 2.5mlbs in January. The consultant settled its month-end spot price indicator at US$38.50/lb, down US15c from week-end. Four transactions totalling less than 1mlbs were recorded in the term markets in February.

France has reiterated its commitment to reducing the nuclear power contribution to the country’s energy mix to 50% from 75% by 2025. Meanwhile, the EU has announced plans to create a single “energy union” representing the 28 member states, in order to circle the wagons and reduce reliance on Russian gas imports. The union would be committed to reducing the level of fossil fuel consumption and focused on alternative energy sources, but it is unclear where this leaves nuclear power.

France is looking to cut its nuclear power exposure while Germany intends to close down its reactors altogether, while the UK is building new ones.

Whatever the case, Russia is back in the frame again following the lack of promised ceasefire in Ukraine. The US and Europe have threatened to further increase sanctions on Russia, and Russia has already threatened to cut off gas supplies to Ukraine as a response. This implies cutting off all of Europe, as European imports flow through Ukraine.

Talk of any fresh sanctions also brings back the spectre of disruption to the uranium market, in which Russia is the world’s biggest supplier of enriched uranium.
 

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By Greg Peel

The spot uranium market was a-buzz at the beginning of last week with anticipation of what impact coincident news of supply disruptions at two Australian-owned uranium mines might have on prices. Would those utilities known to be quietly contemplating purchases suddenly decide they better get a move on?

Two weeks ago BHP Billiton ((BHP)) suffered a failure at the processing mill of its Olympic Dam mine in South Australia which is likely to put the mill out of operation for up to six months and result in 3-4mlbs less uranium production. At the same time, Rio Tinto ((RIO)) announced a fire at its Rossing recovery plant in Namibia which has not interrupted production, but investigations may lead ultimately to production plans being impacted.

These disruptions are no minor story in the global uranium market, thus industry consultant TradeTech was surprised when an anticipated burst of urgent buying did not eventuate last week, and indeed the market went very quiet. Early in the month the spot market was registering substantially higher levels of activity than in the same month last year, but last week saw only three transactions conducted totalling 500,000lbs of U3O8 equivalent.

It seems the buyers and sellers are more content to sit on the sidelines until more detail is forthcoming with regard constrained supply. TradeTech also notes that while a number of utilities are considering purchases, they are currently pursuing off-market avenues directly with suppliers. Suppliers, on the other hand, have pulled back offer prices in anticipation of strengthening demand.

TradeTech's weekly spot price indicator did nevertheless manage to rise US15c last week to US$38.25/lb. One transaction was reported in the term market, and TradeTech's term price indicators remain unchanged at US$41.25/lb (mid) and US$50.00/lb (long).
 

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By Greg Peel

After a flurry of activity in the previous couple of weeks, volumes on the spot uranium market settled back last week, industry consultant TradeTech reports, as utilities proved reluctant to follow prices higher. Seven transactions totalling 700,000lbs of U3O8 equivalent were conducted – half the previous week’s volume – with traders making up the buy-side.

As traders and producers entered on the sell-side it appeared the uranium price would be forced lower last week but then news broke of supply disruptions and thus prices later in the week held up. TradeTech’s weekly spot price indicator is down a mere US5c to US$38.10/lb.

It appears the gods are not smiling on Australian uranium producers at present. Last week BHP Billiton ((BHP)) suffered an electrical failure at its Olympic Dam mine in South Australia, putting the Svedala processing mill out of operation for potentially six months. Deliveries will not be impacted but 2015 production will be reduced by 3-4mlbs.

And coincidently, Rio Tinto ((RIO)) suffered a fire at its Rossing recovery plant in Namibia and as investigations continue, it is yet unclear as to what extent production will be impacted.

There was potential good news for BHP nonetheless, with the announcement the South Australian government will conduct a royal commission into the possible development of a nuclear energy program in the state.

Australia’s nuclear history is one of ups and downs, but in the post Chernobyl era the then government restricted nuclear mining, strictly vetted export customers, and considered the prospect of nuclear power generation unpalatable for the electorate. Mining restriction has eased a little since, albeit some states still maintain bans, and while customers are still strictly vetted there remains no nuclear reactor in the country bar a small plant used to manufacture medical isotopes.

The argument as to whether Australia should look to nuclear power as part of an effort to reduce carbon emissions, and indeed as to whether nuclear power really does offset carbon, continues to rage in the post-Fukushima environment. The South Australian government would be the first to test the electorate, if such a decision is made. Currently the state relies on gas and coal-fired electricity generation with some supplement from renewable sources.

And Australia’s biggest uranium mine is in South Australia.

Coming back to Fukushima, there was news out last week the Japanese regulator has cleared Kansai Electric Power Co’s Takahama units 3 and 4 in the Fukui prefecture for restart. Kyushu Power’s Sendai 1 and 2 units have already been cleared for restart, perhaps by June, so the Takahama units are next off the blocks.

But as the long Sendai process indicated, safety clearance is one thing but political clearance is another. Neighbouring prefectures have already voiced their concerns with regard potential accidents, so the regulator may yet need to address these issues, as was the case for the Sendai plants, before any timetable for restart can even be contemplated.

TradeTech reports no transactions in the uranium terms markets last week. The consultant’s term price indicators are unchanged at US$41.25/lb (mid) and US$50.00/lb (long).

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By Greg Peel

Last week saw 1.6mlbs of U3O8 equivalent change hands in eight transactions compared to 1.1mlbs the week before and 600,000lbs in the same week last year. Industry consultant TradeTech reports the bulk of buyers are non-end users of uranium, such as intermediaries and speculators, but several utilities have moved into the market in an attempt to quietly source material.

Pricing is being determined by delivery date, with “spot” deliveries as late as the December quarter requiring higher prices than more immediate transactions. Spot prices climbed over the course of the week as sellers continued to exploit newfound demand. TradeTech’s spot price indicator closed the week at US$38.15/lb, up US90c from the week before.

Two transactions were reported in the term market last week totalling 400,000lbs. TradeTech has lifted its mid-term price indicator by US$2.25 to US$41.25/lb while leaving its long-term indicator unchanged at US$50.00/lb.

Media reports out last week suggested the Japanese government is hoping to restart the first of the country’s idled reactors – the Sendai Units 1 and 2 – by around June. By then Japan’s regulator is expected to have completed the final inspections ahead of the prime minister granting final restart approval. The local mayor and governor granted approval late last year.

No official announcement has been made regarding a restart date but reports note a June restart would follow the April general election, at which Shinzo Abe can make his case. While there remains significant opposition in Japan to nuclear energy, the country’s economy was crippled last year by the cost of importing fossil fuels to replace the 30% of Japan’s electricity previously generated by nuclear reactors. Cleary fossil fuel costs are now a lot cheaper, but this does not alter the fact the Abe government would like to see at least a particle return to previous nuclear capacity.
 

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By Greg Peel

Various uranium producing countries reported their annual production results last week. Once again Kazakhstan topped the global production numbers, pumping out 59.4mlbs of U3O8 in 2014. The US produced 4.9mlbs in 2014, up 5% on 2013.

It was a different story in Australia nonetheless, where production fell to 13.0mlbs compared to 16.5mlbs last year, to mark the lowest volume in sixteen years. The fall came despite the start-up of the Four Mile mine in South Australia, and mostly reflects loss of production at Energy Resources of Australia’s ((ERA)) Ranger mine in the Northern Territory due to a heap leach tank failure. BHP Billiton’s Olympic Dam ((BHP)) produced the bulk of Australia’s output, at 7.4mlbs.

On the demand side, China imported 55.4mlbs of U3O8 in 2014, up 11.5% from 2013. The average price for deliveries was US$43.18/lb, down from US$48.09/lb last year.

Two weeks ago saw minimal activity in the spot uranium market despite a line-up of buyer interest, given sellers decided to back off their prices. It was the right call it would seem, as last week the buyers broker ranks and hit the higher prices, sparking a busy week in which 1.1mlbs of U3O8 changed hands in eleven transactions. Utilities, traders and other intermediaries were all in buying, reports industry consultant TradeTech, while traders, who have been quietly accumulating product of late, accounted for 75% of the sales.

Traded prices reached as high as US$37.50/lb in the week, TradeTech notes, encouraging more sellers to enter the market. TradeTech’s spot price indicator settled at US$37.25/lb at week’s, and month’s end, up US50c from the week before.

Only one transaction involving a small quantity was concluded in the term market last week. TradeTech’s term price indicators remain unchanged at US$39/lb (mid) and US$50/lb (long).
 

Technical limitations

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By Greg Peel

Uranium market participants gathered in Washington last week for the annual Nuclear Fuel Supply Forum but this proved no distraction to the buying interest that has been building in early 2015. Utilities, intermediaries, producers and speculators all expressed interest in buying spot uranium last week, forcing nervous sellers to back off on their offer prices, reports industry consultant TradeTech.

While five transactions totalling 500,000lbs of U3O8 equivalent were concluded last week, the reality is the price gap between keen buyers and willing sellers has widened further. TradeTech has lifted its weekly spot price indicator by US75c to US$36.75/lb.

Several utilities are also preparing to enter the mid and long term uranium markets, TradeTech notes, which is likely to affect a flow-through to spot market prices as intermediaries seek to gather product for sale into term contracts. Three transactions totalling 600,000lbs of U3O8 were concluded in the term market last week. TradeTech’s term price indicators remain unchanged on US$39.00/lb (mid) and US$50.00/lb (long).

Australian-listed uranium producers were in the spotlight last week as the local resources sector quarterly reporting season rolled on. There are smiles beginning to return at Paladin Energy ((PDN)), where production at the company’s Langer Heinrich mine in Namibia increased 27% and revenues increased 79% on the previous quarter. Paladin is also conducting a feasibility study ahead of possibly reopening its Kayekelera mine in Malawi, which was placed into care & maintenance last year due to weak uranium prices and Paladin’s burgeoning debt issues.

Uranium production also increased at BHP Billiton’s ((BHP)) Olympic Dam mine, rising 24% for the quarter and 7% year on year. Rio Tinto ((RIO)) otherwise bucked the trend, seeing 36% lower production at its Rossing mine in Namibia, in response to low prices, and minimal production from majority-owned Energy Resources of Australia’s ((ERA)) Ranger mine due to leach tank issues through 2014.
 

Technical limitations

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