By Andrew Nelson

Just about every week the uranium spot price is either flat of trickles a little lower despite the growing amount of optimism coming from market participants, assorted analysts and self-proclaimed experts. Last week was no different, except there was a bit of not so good news as well.

Ironically, one of the biggest pieces of news supporting a positive uranium outlook that we’ve seen over the last few months has been Japan’s decision to re-start idled reactors post the Fukushima incident.  Well, the Japanese have pulled the rug out, with a Cabinet panel last Friday calling for a phasing out of nuclear power altogether over the next three decades.

AP reports that before the Fukushima accident, the country needed nuclear power to generate more than 30% of its energy and the plans were to raise that to 50% by 2030. However, growing anti-nuclear sentiment and a number mass of protests post-Fukushima have the government now changing these plans.

The real question is: how serious is the Japanese government? At first read, it seems not very much. At least not yet. The phase-out of nuclear power by 2030 will mean more oil, more gas and more alternative energy. Moreover, the government as yet has no idea as to how it will pay for the costly expansion of renewable energy and also how to minimize the environmental impact of a return to fossil fuels.

The report from AP also notes the new policy will delay decisions on spent fuel processing and radioactive waste disposal. So, we’re also left wondering what Japan will do with its spent nuclear fuel to avoid accumulating stockpiles of plutonium. The new policy does allow Japan to continue its fuel recycling program, despite the nuclear phase-out, which certainly seems like a big contradiction.

In fact, the latter fact had the US Deputy Secretary of Energy Daniel Poneman asking questions about Japan's ability to reduce plutonium stockpiles, reports AP.

So more uranium for Japan? Maybe yes, maybe no, which is the same answer we’ve had for months now. And so it goes.

Now let’s take a look at some of the positive chatter that hit the wires last week. Retail research house Five Star Equities reported last week that the Global X Uranium ETF (URA) is up nearly 8% over the past month after falling over 50% last year on Japan's nuclear disaster.

Meanwhile, Seeking Alpha interviewed Independent Researcher Alka Singh of Mine2Capital last week and he believes uranium fundamentals are now at a tipping point. Singh points out that while uranium prices may be down, so are supplies.  And this looming supply gap must be filled at some point.

On his numbers, there are 433 operating nuclear power reactors around the world and they consume 177 million pounds of uranium. Last year, global production was 130mlb. The gap has traditionally been filled by the recycling of Russian weapons grade uranium under the HEU Agreement, but that’s about to expire. He also notes that most supply is being generated at near un-economic levels given low prices. Something’s gotta give.

In the mean time, the U308 spot market remains just one notch up from dead. Industry consultant TradeTech report there were just 4 spot transactions booked on the uranium market last week and they accounted for 400,000 pounds changing hands. Well down from the already anaemic 750,000 pounds that were transacted the week before.

The funny thing here is that TradeTech also thought the market, especially sellers, were growing more positive on the outlook, expecting the imminent arrival of new buyers seeking to secure material for uncommitted needs in 2013 and beyond. Then the Japanese did an about face and buyers stepped back to wait for the price to drop. And it did.

Thus sellers that were preparing to ride prices a little higher on the expectation of increasing demand found themselves dropping offer prices yet again just to get deals done. As a result, TradeTech’s Weekly U3O8 Spot Price Indicator slipped another US$0.60 to US$47.40 per pound last week.

There was a little bit of new demand in the term market, but not enough to shift prices. TradeTech’s mid-term and long-term U3O8 Price Indicators remained unchanged at US$51.75 per pound and US$60.00 per pound respectively.

 
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By Andrew Nelson

No matter where you look, or what you read, or whom you talk to; analysts, commentators and investors alike remain guardedly optimistic about the prospects for a rise in uranium prices in the not too distant future. In the meantime, the spot price has traded within a US$5 band of US$50 dollars for more than a year now.

The latest bit of indicative optimism is news that Canadian miner Cameco is on a bit of a buying spree that started with a $430 million bid for BHP Billiton's ((BHP)) Yeelirrie project a few weeks back. U308.com reports the company intends to nearly double its production by 2018 to take advantage of anticipated increasing demand and expected supply shortfalls.

In the meantime, the spot market languishes. Industry consultant TradeTech reports there were just six transactions totalling over 750,000 thousand pounds U3O8 that were conducted last week in the spot uranium market. There was a broad mix of market participants, with utilities, producers, traders and financial entities joining in on the fun.

TradeTech notes prices were flat over the course of the week, with the bulk of material sold at, or very close to Friday’s finishing price of US$48.00 per pound. Last week’s spot price was thus unchanged from the week prior’s.

Once again, transaction volumes were small compared to the weekly volumes posted earlier this year, but TradeTech still thinks the market is starting to break out of the summer doldrums, as both buyers and sellers seem to be reaching agreements on pricing a little more easily than has recently been the case. And if you want to take anything away from last week’s spot trading, this is it, as it is beginning to appear the spread between willing buyers and willing sellers is starting to narrow a little bit more than it certainly has over the past few months.

There is also the chance of a bit of positive news flow from the sector this week. The World Nuclear Association’s Annual Symposium in London is kicking off this week. And with the market increasingly expecting a rise in activity, developments in Japan and its looming announcement on future energy policies will also be highly anticipated.

There was a little more activity than normal on the term market last week, with four transactions reported. TradeTech notes the buyers were utilities and financial entities. There was also some new demand, with a US utility looking for more than 1m pounds and a non-US utility also expected to enter the market soon.

The activity has yet to flow through to prices, however, with both the mid-term and long term price indicators remaining fixed at US$51.75/lb and US$60.00/lb respectively.

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By Andrew Nelson

One thing is for certain, there was a lot more activity in the uranium spot market in August than there was in July. Prices may not have improved, but at least there was a run of optimistic talk, rumour and theory that percolated through the market, keeping investors and market watchers on their toes.

Over the course of August there were 17 transactions that took place in the spot market, with a total of 2.9m pounds of U3O8 equivalent changing hands. This is significantly more than the 1.4m pounds that were traded on the spot market in July.

Industry consultant TradeTech notes buyers were utilities and intermediaries for the most part, with the selling group being comprised of traders, producers and financial entities. The prominent featuring of traders and financial entities does little to inspire optimism amongst the bullish crowd, as it signifies that there remains a significant amount of speculative interest in the energy metal.

TradeTech believes the increased uranium market activity can be attributed to the pullback in the spot price that played out over July and August. The consultant notes that prices in deals reported during August declined as each successive deal was done. In fact, the pullback gathered momentum as the month neared its end.

Seller resolve finally began to crack under the strain of inactivity, with a number of marketers who were unwilling to drop offer prices finally buckling, seemingly determined to do some business even if it meant dropping prices. The lower the price went the more buying interest and thus an increase in volume traded for the month.

The positive side of their equation, if there is one, is that hopefully these “distressed” transactions are helping to clear the market of discount stock. Still, demand remains patchy at best and continues to be highly price sensitive.

TradeTech does see some improvement in these dynamics, but notes it will take time for a higher quality of demand to filter through. There are potential buyers that are yet to enter the spot market despite the recent weakness in prices. For utilities, it is a question of available budget to build inventory or make discretionary purchases, but management and budget allocations take time.

Until there is a pickup in steady demand, TradeTech notes there is increased talk in the market that prices could fall even further, seeing many prospective buyers delay purchases in hopes of getting an even better price.

For the month ending August 31, 2012, TradeTech’s Exchange Value was at US$48.00 per pound, down US$1.50 from the end of July and down US$0.75 from last week. Last week also saw broker Goldman Sachs trim its year-average uranium price forecast by US$1.00 to US$52.00 per pound for 2012.

There was a bit of new demand in the term uranium market last month, with news a US utility is now looking for over 1 million pounds U3O8 equivalent . TradeTech also expects that a non-US utility will also formally enter the market soon for “significant quantities”.

Until then, there remains a weakening trend to contend with. TradeTech’s Mid -Term U3O8 Price Indicator lost US $1.75 to $51.75 per pound over the course of the month, while the Long-Term Price Indicator to August 31 fell US$1.00 to US$60.00 per pound. The declines in both term indicators were booked towards the end of the month.

Increasing demand is expected in the mid-term market, but it has yet to materialize seeing prices in the mid-term market continue to weaken along with the spot uranium price. The long-term market is increasingly starting to see an increased willingness among sellers to drop offer prices in order to secure long-term commitments.

 
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By Andrew Nelson

You can call it a support, or you can call it resistance, but either way uranium has stayed within a few dollars of US$50/lb for a long time now. There have been signs of firmness and signs of weakness over the past 12 months and with speculative talk now trickling through the market of theoretical emerging supply tightness and the possibility of increasing demand, the spot price has held steady for a few weeks now.

Looking at and trying to draw conclusions from a market that doesn’t do much week in and week out gets a little bit harder to do every time you try. One pines for novel information in order to say something new. When you finally get something new, it’s hard not to go over the top with either optimism or gloom.

Over the past few weeks we have written about the possibility a looming supply shortfall, the prospects of increasing Asian, European and North American demand, to name just a few. There seem to be a growing number of analysts talking about building exposure now, as prices in this sector could climb quickly once they're set in motion.

But as of yet, there is no motion, only talk, and the U308 spot price is rooted firmly to its year-long support/resistance level. Last week saw no change in this. There was, however, a little more talk, a little more news.

China is planning to build as many as 100 reactors over the next two decades. While there is nothing new in this statement, there is at list a little more motion. China’s National Nuclear Power Co said it has now received final approval from the Ministry of Environmental Protection to move forward with its planned initial public offering.

The state-owned nuclear power operator said in June that it had received preliminary approval from the ministry to move ahead with an IPO to finance five power projects valued at 173.5 billion renminbi (US$27.3 billion). The ministry's approval is the first tangible step, but the impact of this decision is likely months or more likely years away.

None the less, it is good news, as China had suspended the construction of new reactors following the Fukushima nuclear disaster in Japan last year. Thus while positive statements about China’s plans have been flowing though the market for the past few months, these latest claims at least have a little more substance.

There was another instance of old news turned new, good news last week. The market has known for months that BHP Billiton ((BHP)) was going to push back plans for the expansion of Olympic Dam. BHP has been dropping hints for months. But until the release of the company’s full-year earnings report, it wasn’t official. Well, now it is official.

Post the company’s result, analysts at JP Morgan ventured to guess that at best, it is unlikely there will be a material increase in uranium production from the Olympic Dam before the end of the decade. Such an outcome would significantly tighten the longer-term outlook for uranium, in the broker’s view.

Unsurprisingly, the broker remains fairly positive on the uranium market given that the current spot price around US$50/lb is well below its estimate for the price required for expansion projects to book a decent return. JP Morgan estimates that the average incentive price for new projects is around US$83/lb.

Thus with demand expected to grow, driven largely by China’s nuclear growth program, the broker thinks  uranium prices must push higher at some point to simply encourage production growth.

Until then, we’re still stuck where we are.

 Last week industry consultant TradeTech noted a continuation of slightly higher activity levels that were seen the prior week. While volumes were down, 600,000/lbs changing hands last week, there were five transactions, which was more than the week before.  Buyers included utilities, traders, and financial entities, notes TradeTech.

The good news to take from this is that utilities are back on the list and are actually showing some interest in purchases at current price levels.

However, TradeTech notes the majority of demand remains discretionary in nature, with buyers continuing to resist paying higher prices. In response, sellers have been willing to sell at the current price, but have been wary retreat higher for fear buyers could be spooked and pull out of the market once more.

Thus, TradeTech’s Weekly U3O8 Spot Price Indicator stayed put at US$49.00 per pound, unchanged from the week prior.

There were again no new transactions on the term market, but TradeTech notes there was some new demand here as well. A US utility entered the market last week looking for over 1 million pounds, while a non-US utility is also expected to formally enter the market soon for “significant” quantities of material, notes TradeTech.

Yet despite the good news, once again it has only added up to talk at this point. TradeTech’s Mid-Term U3O8 Price Indicator has stayed put at US$53.50 per pound, while the Long-Term U3O8 Price Indicator remained at US$61.00 per pound.

 
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By Andrew Nelson

Last week was slightly busier than what passes for normal these days on the uranium spot market. Deals were done, volumes were heavier and there were signs of new demand emanating from the broader market as buyers emerge to take advantage of currently depressed prices.

Local operator Paladin Energy ((PDN)) was a definite beneficiary of renewed interest in uranium supply last week. The company announced it would be handed $200m by a utility six years in advance of any delivery requirements and if delivery is eventually requested, the transaction will be done at the prevailing spot price.

The next bit of positive demand-side news came from the United Arab Emirates, with the country contracting for a 15-year supply of uranium and conversion/enrichment services from a Areva, Uranium One, Rio Tinto ((RIO)) , ConverDyn, Urenco and Tenex in a deal worth $3bn. The supply is to fuel the Barakah plant, UAE’s first nuclear power plant, which is scheduled to begin generation in 2017.

In addition to the stock that has been contracted, Emirates Nuclear Energy Corp also said it “expects to return to the market at various times to take advantage of favorable market conditions and to strengthen its security of supply position.”

In addition to the 4 reactors under construction in the UAE, neighbour Saudi Arabia has another 16 nuclear reactors planned over the next 20 years.

David Talbot of Dundee Securities notes that one doesn’t normally see utilities stock up so far ahead of time and he believes that these transactions are a signal that at least the two abovementioned buyers are worried about supplies.

“The more they are worried, the more quickly we expect them to react. This time we view these contracts as different...this might be the catalyst we have all been looking for,” he said.

If it is the catalyst Talbot has been waiting for: the news may well help to firm up spot prices in the near term. In fact, it may be possible that the impact is already being felt.

Industry consultant TradeTech reports that last week saw an upswing in activity, with 4 transactions reported and 950,000 pounds of U308 changing hands. Let’s hope this pick-up in volumes is an indication prices have dipped low enough and stayed there long enough to start attracting some steadier buying interest.

Another positive sign was that utilities were the buyers of the majority of the material that was sold last week. TradeTech notes that a number of other buyers are continuing to think about entering the market, although most of this speculative demand remains centred around delivery in late 2012, or early 2013.

That’s why it’s not time for uranium fans to pop the corks just yet. While it seems that lower prices are finally starting to generate some additional buying interest, TradeTech notes current demand remains extremely price sensitive, thus any increase in offer prices could see these potential head for the doors.

This has seen prices stabilize in what is a narrow band range, with sellers remaining concerned about both lowering and/or increasing prices significantly. Last week saw TradeTech’s Daily U3O8 Spot Price Indicator stay put at US49.00/lb.

Despite the deals done last week in the term market, TradeTech’s Mid-Term and Long-Term Price Indicators were yet again unchanged at US$53.00/lb and US$61.00/lb respectively.

 
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