By Andrew Nelson

Last week The Japan Times reported that Japanese utilities were selling uranium inventory. The news claimed the Japan Atomic Power Company (JAPC) had already sold some of its inventory to help repay loans taken out over the past year. Tokyo Electric Power is also said to be considering the same plan.

Japan and its return to nuclear power generation has been the main driving factor of uranium prices since the Fukushima meltdown in March 2011 and this latest news has brought the nagging topic of inventory management right back to the fore.

Industry consultant TradeTech notes that Japanese nuclear utilities have traditionally maintained significant nuclear fuel inventories, enough to fuel their reactors for several years. This is to forestall the impact of any unexpected supply disruptions. The first steps taken post Fukushima were to cancel and/or defer upcoming deliveries to minimise any financial burdens. A number of utilities also looked to put their inventories to use via material loans.

If there is any good news to be taken from this, it’s that other utilities still have no intention to sell down stock. However, JAPC used to say the same thing and not too long ago, either. That said, JPAC is unique in that it faces an unsure future, having been recently denied approval by the new Nuclear Regulatory Agency to restart two reactors.

TradeTech reports that as the week came to a close, a few buyers were drawn out by the lower prices and re-entered the market. Limited activity was reported, with there being only four transactions that added up to around 500 thousand pounds U308. The spot uranium price fell US$1.00 to US$42.00/lb.

The term uranium market was quiet last week, with no new demand or transactions reported. TradeTech’s Mid-Term U3O8 Price Indicator stayed put at US$49.00/lb, while the Long-Term Price Indicator was unchanged from US$57.00/lb.

News last week from Areva will do little to help spot prices, the second largest producer in the world reporting a record production report for 2012. 

On the flipside, Unit 1 at China’s Hongyanhe nuclear station began operating last week after government approval was received in October. Probably the most important implication of this news is that the move has effectively lifted a self-imposed two-year ban on existing and new nuclear projects following the Fukushima crisis in Japan.
 

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By Andrew Nelson

Uranium trading was pretty steady last week, with six transactions reported and just under one million pounds changing hands. The problem for suppliers is that deals were transacted at progressively lower prices as the week progressed.

Utilities, traders, producers and financial entities were all active in the market, with industry consultant TradeTech noting that a fairly broad range of prices were seen depending on delivery locations and timing. Those sales involving immediate delivery were lower, while delivery for later in the year garnered higher prices.

When the dust settled, TradeTech’s Weekly U308 Spot Price Indicator was set at US$43.00 per pound, down US$0.50 from the week prior.

The soft prices came as little surprise to commodities analysts at Commonwealth Bank ((CBA)), who suggest there is still too much supply in the uranium market. The bank has moved to lower its uranium price forecast by 9% in FY13, by 12% in FY14 and by 2% for FY15. The bank’s new prices are US$45/lb, US$54/lb and US72/lb respectively.

There were signs of life in the term uranium market, with TradeTech reporting three transactions that saw less than 500,000 pounds change owners. The activity did little to change market dynamics, with TradeTech’s Mid-Term price staying put at US$49.00 per pound.

There are still some active shoppers in the term market, but this has had no impact on TradeTech’s Long-Term Indicator, which has stayed held firm at US$57.00 per pound.

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By Andrew Nelson

It was a pretty busy week in the uranium market last week news-wise, although actual market activity was far less interesting. Activity in the spot market was steady, not exciting, with six trades seeing some 800,000 pounds change hands on slightly softening prices.

While trades were being executed, many were keeping at least one eye on the news screens following a number of events that could potentially have significant influence on the market depending upon how they develop. The big issue holding attention was severe storms in Kazakhstan, which saw at least some temporary production shutdowns across the country.

As the news first started to hit the wires, many in the market grew concerned about the prospect of significant production impacts. Such an outcome would almost certainly have a direct impact on spot markets, given the nation’s place as the world’s largest uranium exporter. But it turns out production stoppages were brief and are expected to cause but little disruption to deliveries.

Yet while there may have been little impact from the storms in Kazakhstan, the market’s reaction serves to underscore the growing amount of nervousness at the increasing levels of consolidation within the industry, which is becoming increasingly reliant on a shrinking pool of producing regions and companies.

Industry analyst TradeTech reports that interest within the market is slowly shifting from spot trade to the mid-term market. Prices over the course of last week were unchanged for the most part, but there was a bit of a bump late in the week, which ended up seeing a slight drop in spot price. Traders and intermediaries represented the bulk of the buyers. By the end of last week, TradeTech’s Weekly U308 Spot Price Indicator was down US$0.25 to US$43.50 per pound.

Meanwhile, there were a number of transactions reported last week in the mid-term uranium market that involved more than 1m pounds. Yet despite what must have been the busiest week in the mid-term market in a long time, TradeTech’s Mid-Term U3O8 Price Indicator was unchanged at US$49.00/lb. There were no deals booked in the long-term market, which means the Long-Term Price Indicator was also unchanged at US$57.00/lb.

There was a bit of news out of Australia that presents fairly mixed implications, at least for Australian investors. BHP Billiton ((BHP)) cut another hundred jobs at the Olympic Dam copper and uranium project in South Australia. Weak commodity prices, especially for uranium, and the strong Australian dollar were blamed for the cuts.
 

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By Andrew Nelson

January was an interesting if not riveting month for uranium market watchers. Volatility was the name of the game, but the good news for investors and producers is that while it may have been volatile, January was still a positive month in terms of spot price movements.

We started the month off with a US$43.25 per pound spot price and a hope that the advances we’d been seeing for the last few months of 2012 would continue on into the new year. After all, everyone and their dog had been harping on for months about how supply was dwindling and demand must improve at some point. The Japanese restarts, Chinese reactor building, growing Indian demand: Well it seems the less supply more demand mindset is finally starting to gain some traction.

January ended with TradeTech’s U308 Spot Price Indicator sitting at US$43.75/lb, up US$0.50 on December’s price and flat on last week’s Weekly Price. Prices did trade as high as US$44.50/lb towards the end of the month, but quickly came back to settle where we are now. The little spike in the spot price was brought on by a pickup in speculative activity rather than organic fundamentals, with most of the increased buying activity coming from financial entities and traders.

As far as TradeTech is concerned, there are a number of issues currently at play. First, political unrest in the West African nation of Mali. While Mali isn’t itself a uranium producer of note, next door neighbour Niger is. Next, the production cuts brought about by low uranium prices are also starting to have an impact. Lastly, there are some stringent new safety measures being proposed by Japan’s new Nuclear Regulatory Authority, which have taken the shine off of the Japan story over the short term once again.

As far as activity last month goes, TradeTech reports that every new buying inquiry encouraged sellers to lift offer prices, with buyers generally more willing to pay higher prices in order to secure material. The activity also woke up a number of utilities, who started to jump back in. In all, there were 33 deals booked over the course of January that saw some 4.6m pounds of uranium change hands. This compares to just 22 transactions and 2.7m pounds in December.

There were also three transactions reported in the term uranium market over January, with three US utilities picked as preferred suppliers for mid-term deliveries. Some new demand was also reported in the term market over the course of last month, with TradeTech noting the entry of two non-US utilities.

The action saw TradeTech's Mid-Term U3O8 Price Indicator push up to US$49.00/lb, up US$1.00 from last month’s value. The Long-Term indicator stayed put at US$57.00/lb.

Last week there were just four transactions reported on the spot market that saw 800,000 pounds of uranium find a new owner. The buyers were again traders and financial entities, although as we mentioned earlier, utilities have also joined the fray. Otherwise, market participants continue to struggle with the uncertainties facing the market.

Spot, mid and long-term markets finished off the last week of a hectic week of January with very sedate performances. All prices were unchanged from the previous week and ended the month at the above mentioned levels.
 

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By Andrew Nelson

Last week was certainly a busier one in the uranium market, with nine deals done and nearly one million pounds of uranium changing hands. Certainly a big jump from the 400,000 pounds transacted the week before.

Despite the higher transaction levels, which tend to flatten out volatility a bit, industry consultant TradeTech reports that last week’s increased volume brought increased price volatility right along with it. Financial entities and traders made up the bulk of the buy side and were undeterred as prices started to shoot higher in the latter half of the week. Starving sellers were quick to seize the opportunity, raising offer prices as the week progressed.

However, once the now current spot price was breached, activity started to cool and prices started to come back off again. Despite this, the frantic activity earlier on spurred on a number of utilities to enter the market, although TradeTech notes the bulk of the buying was still done by traders and financials.

The volatility has left many scratching their heads about the motivation behind the sharp pick-up in buying activity. While there is a bit of talk about the political unrest in the West African nation of Mali, which has brought about a number of production cutbacks, TradeTech notes some believe that buyers are simply building a bit of stock to cover either previous delivery commitments, or in advance of some hoped for mid-term opportunities.

It’s a bit of both, says TradeTech. And given the consultant believes these issues will take more than a week or two to resolve, it sees a continuation of on and off price volatility as a realistic option going forward.

By the end of last week, TradeTech’s Weekly U308 Spot Price Indicator was at US$43.75/lb, up US$1.25 from the prior week’s, with US$0.50 of that added on Friday.

There was also a bit of life in the term uranium market, with some new demand entering in the form of a non-US utility looking for around 2.2m pounds for delivery between 2014 and 2020. TradeTech notes there are still a few other US and non-US utilities seeking over 10m pounds of stock out until 2025.

Despite the increased interest, the term price remained unchanged. TradeTech’s Mid-Term U308 Price Indicator stayed put at US$48.00/lb and the Long-Term Price Indicator held firm at US$57.00/lb.

There was a bit of good news for uranium sellers making the rounds of the on-line press last week. An article by moneymorning.com’s resources specialist Peter Krauth posits we may be reaching the end of this latest downward cycle in uranium prices.

In fact, Krauth expects the spot uranium price could rise as high as the US$70/lb range within the next 12-18 months. The presumption is based on an expected acceleration of the reactor restart program in Japan on the back of the newly elected, pro-nuclear government and the end of the end of the Megatons to Megawatts program later in the year. That’s the one where the US buys highly-enriched uranium from Russia’s decommissioned nuclear weapons. 
 

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By Andrew Nelson

Last week Paladin ((PDN)) reported its quarterly results and while they were broadly well received, with production and sales levels strong, brokers remain universally concerned about the direction of the underlying uranium price, which has become the main driver to which broker recommendations are now pinned.

Examples: JP Morgan is at Hold and believes uranium prices will remain depressed over 2013. Says the broker “we do not believe Paladin can make positive cash flow at current spot uranium prices, and given the balance sheet leverage we do not expect the stock to re-rate unless uranium prices move higher.”

Deutsche Bank also believes Paladin’s growth profile remains one of the most attractive in the uranium industry and its long-term expectation for uranium beyond 2015 is positive given increasing Chinese demand and the re-start of Japanese reactors. However, the broker sits at Hold now because of short-medium term uranium spot price weakness.

UBS sits at Buy and guess what; the broker sees things moving in uranium’s favour during 2013. The broker’s hit list of good news includes the hope the newly elected Japanese government will get to work restarting those 48 idled reactors, the fact that there are 29 nuclear plants currently under construction in China, dwindling supply and stock levels given the lack of production incentive offered by current prices and increasing M&A activity in the sector.

Conversely, BA-Merrill Lynch sits at Sell and it is unsurprisingly not constructive on uranium prices at the moment. The broker has doubts about reactor restarts in Japan, saying “the fate of nuclear power in Japan’s energy future remains highly uncertain.” The broker reasons that even though the pro-nuclear Liberal Democratic Party will work to get nuclear energy built back up, a conclusion on all nuclear reactors will take up to three years, with restarts subject to local approval and public opinion which are expected to remain a major obstacle.

Today’s guest analysts from Raymond James maintain a Buy call on Paladin and are unsurprisingly positive on the outlook for uranium prices. The broker notes operational performance continues to improve, which not only increases the fundamental value of the stock, but also makes it increasingly attractive as a takeout target. As such, the broker remains bullish on the shares over the next 6-12 months.

To underscore the increasing focus of M&A activity in the space, Raymond James notes that last week’s takeout of Canada’s Fission Energy by Dennison Mines in an all-share deal worth roughly C$72m will do a good job in drawing the interest of majors such as Rio Tinto ((RIO)), Cameco, and maybe the Chinese. It’s important to keep in mind that of the nuclear capacity expected to come online over the next 20 years, the bulk of it will come from China.

That brings us, in a big circle, to the spot uranium market and what happened in it last week. Industry consultant TradeTech reports some very light activity, with just 400,000 pounds of U308 changing hands on four deals. Traders and intermediaries were both the buyers and sellers for the most part and price remained the main driver.

In fact, as prices rose last week, the gap between willing buyers and willing sellers widened, with TradeTech reporting that neither seemed all that willing to budge on price to get deals done. Hence, the light market activity. Still, the net result was a slight positive for sellers, with TradeTech’s WeeklyU308 Spot Price Indicator ending the week at US$42.50 per pound, up US$0.50 from the prior week’s value.

Meanwhile, the term market was devoid of any signs of life, with no new transactions or demand reported. TradeTech’s Mid-Term U308 Price Indicator remains fixed at US$48.00 per pound and the Long-Term Price Indicator stayed put at US$57.00.
 

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By Andrew Nelson

As the old curse goes; may you live in interesting times. And for the uranium market, last year contained surely some interesting times.

For the first nine months of 2012, Fukushima fallout continued to poison the spot market, with talk of Japan and possibly Germany planning to transition away from nuclear power making matters worse. Spot prices slid for most of the year, as buyers waited patiently for prices to fall even further. Uncertainty became the dominant factor driving spot prices.

Spot prices found a bit of a floor towards the latter part of the year and then the big news arrived. Japan’s pro-nuclear Liberal Democratic Party won a landslide victory and the market started to count on a faster-paced restart program for the nation’s 48 inactive reactors. All of a sudden, the risk of Japan winding down purchases and dumping stock was put to bed and uranium spot prices pushed steadily, if only a little higher into the end of the year.

Yet while it was inarguably a tough year for uranium spot prices, there was more than one silver lining to emerge. In fact, 2012 saw a number of positive developments for market fundamentals and an increasing number of industry analysts view some of these developments as at least early signs of a turnaround for uranium spot prices and for the fortunes of uranium miners.

Oft quoted David Talbot from Dundee Securities believes 2013 will see a re-ignition of the global nuclear renaissance. However, while the supply/demand picture is certainly improving, underlying fundamentals are not expected to have a real impact on the spot market until the second half of the year, when Japan’s idled nuclear fleet actually begins to come back online.

The longer term outlook is a different story, with analysts consistently expecting ever increasing levels of demand as nuclear power expansion projects around the world gain traction. Countries such as China, India, Russia, Ukraine, the US, the UK, South Korea and even the United Arab Emirates, are all intent on growing their nuclear fleet.

The World Nuclear Association says 62 reactors will be under construction worldwide this year alone, with another 484 in the pipeline. China leads the way with 26 nuclear reactors under construction and a five-year plan for growing its nuclear program to an installed capacity of between 70 and 80 GWe by 2020 and possibly to 200 GWe by 2030. It doesn’t take much of an imagination to see what this will do to demand levels.

According to The Australian, global demand for the nuclear fuel is expected to increase from 166 million pounds in 2011 to 226 million pounds by 2020, and should total 280 million pounds U3O8 by 2030. At the same time, there is a big question mark about how this demand will be fulfilled. Current production levels, combined with what’s in various development pipelines, just isn’t enough.

In the meantime, Japan remains the short term key and market enthusiasts are best advised to keep a close eye on Japan, as any real improvement in the broader market will likely not happen until the nation’s newly anointed leaders prove they’re serious about restoring the country’s nuclear power program, which used to add up to about 10% of global uranium demand.

According to a report from Uranium Investing News, analysts believe demand will start to exceed supply in 2014. That means sometime in late 2013 or early 2014 we likely to see the spot price start to move more in step with the long-term price, which has remained fairly firm during the spot price meltdown of 2012.

Meanwhile, UBS is expecting prices to return to US$50/lb in 2013 and US$55/lb in 2014, while Credit Suisse has a much more bullish outlook, predicting uranium will trade in a range of US$80/lb to US$90/lb for 2013. JP Morgan is equally as bullish and expects a range of US$78/lb to US$85/lb in the year ahead.

In the meantime, the uranium price has seemingly run out of puff after its dash to the 2012 finish line. Industry analysts TradeTech report last week saw the spot price reverse its recently positive course on what was fairly thin, new year’s trade.

There were a total of just seven transactions last week, which saw around 700,00 pounds of U308 change hands. The consultant notes that the week’s trading started higher, but then some material was sold late in the week at just the prevailing spot. The silver lining here is that when prices did start to move lower, new demand started to enter the market. However, once the bargain sellers had cleared the floor, offer prices began to firm.

By the end of the week, TradeTech’s Weekly U3O8 Spot Price Indicator was down US$0.75 to US$42.00 per pound, with buyers showing little interest in paying more than US$42.00.

The term uranium market remained a nice quiet place to get your reading done, although TradeTech reports there are a number of utilities that continue to evaluate offers.  Right now, there are over eight million pounds of U308 equivalent being sought for delivery between 2015 and 2025. In the meantime, TradeTech’s Mid-Term U3O8 Price Indicator remains stuck at US$48.00 per pound and the Long-Term U308 Price Indicator stays put at US$57.00.

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