By Greg Peel

The buying interest from utilities for uranium in the spot and term markets had been quietly growing, at least up until last week. While utilities have begun to become more interested, as has long been anticipated, they are yet to exhibit any sense of urgency.

Which is why they were happy to stand aside last week as traders saw the calendar approaching June and decided not to be caught with material at books-close for the half year. Their own sense of urgency saw industry consultant TradeTech’s weekly spot price indicator drop by US$1.60 last week to US$27.25/lb.

TradeTech reported low volume nevertheless, with less than 600,000lbs changing hands. No transactions were reported in the term markets. TradeTech’s term price indicators remain unchanged at US$29.25/lb (mid) and US$42.00/lb (long).

One issue frustrating US uranium producers at present, and indeed global producers, is ongoing sales of excess uranium by the US government into a market already struggling with oversupply against current demand.

Last week seventeen members of US Congress from both houses and both parties petitioned the US Department of Energy to cease flooding the market by bartering excess inventories, significantly contributing to oversupply, hurting US uranium producers and forcing job losses in the industry.

The DoE has agreed in the past not to be too aggressive, but clearly the current uranium market is not one in which such ongoing sales can be easily absorbed.
 

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By Greg Peel

America has a problem. While China is leading the global charge to add nuclear power capacity to its “green” energy quota, by rapidly building plants featuring the latest technology, and other emerging markets such as India are also ramping up their plans, the ageing fleet of US reactors is reaching a point of accelerating retirements.

Five US reactors have recently been retired, at least three more are scheduled for closure shortly, and there is a risk up to 15-20 plants will shut down over the next 5-10 years. Speaking at a nuclear power summit hosted by the US Department of Energy, the Energy Secretary declared the time will come – perhaps five to ten years from now – when nuclear power is going to have to see a substantial resurgence.

If the US is to reach its 2030 emission reduction targets, a greater proportion of nuclear power generation will be required than is currently on line. But many new reactor builds will be required just to maintain the current number in the face of retirements, let alone to actually increase capacity. The risk is a more expedient solution to replacing lost power generation through nuclear plant closures is to replace them with the latest technology in gas-fired plants. While gas is a much “greener” solution to electricity generation than coal, it is not zero-emission, as are nuclear plants once up and running.

Replacing nuclear with gas will only add to net emissions, not subtract.

While this dilemma was being pondered at the industry summit, the spot uranium price continued to ratchet up last week, industry consultant TradeTech reports. Utilities, intermediaries and producers all came to the market as buyers, while traders dominated the sell-side. As buying interest builds, sellers are happy to keep backing away their offer prices.

A total of 960,000lbs U3O8 equivalent changed hands last week. TradeTech’s weekly spot price indicator has risen US75c to US$28.85/lb.

One transaction was reported in term markets last week. TradeTech’s term price indicators remain unchanged at US$29.25/lb (mid) and US$42.00/lb (long).

In Australian news, Toro Energy ((TOE)) has released the results of preliminary benefication test work which imply the potential for the uranium feed grade at the company’s Wiluna project in WA to increase by 4.5 times. Toro was the first company to receive uranium mining approval in the the state, which previous governments had banned.

Wiluna is estimated to contain 80.5m pounds of U3O8 – enough to suggest a 20-year mine life.

The Botswanan government has granted approval for that country’s first uranium mine. Australia’s A-Cap Resources ((ACB)) filed a mining licence application last year for its flagship Letlhakane project. Letlhakane has an official reserve of 65.7m pounds U3O8, offering a potential 18-year mine life.

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By Greg Peel

For a long time, sellers of uranium have been convinced buyers of uranium must soon re-enter the market with more urgency in order to secure mid to long term supply. Every now and again the sellers have capitulated, no longer able to hold out, but amidst ongoing news of global supply curtailments there has been a reluctance of late to meet minimal buying interest.

Buyers did return last week, industry consultant TradeTech reports, to offer renewed signs of life to the spot uranium market. Transactions worth a total of almost one million pounds U3O8 equivalent were concluded, with utilities, traders and producers all involved. Each successive transaction traded at a higher price as the week progressed, as sellers backed away from more eager buying interest.

As a result, TradeTech’s weekly spot price indicator has risen US50c to US$28.10/lb.

Three transactions were concluded in the term markets last week, TradeTech reports. Moreover, one utility seeking 2.6mlbs for 2019-22 delivery has concluded its evaluation. A utility is seeking 1.2mlbs for delivery over 2018-20 and another is seeking interest for 1mlbs to be delivered every year from 2016 to 2029. Various other fresh term market enquiries have also emerged.

TradeTechs’ term market indicators remain unchanged for now at US$29.25/lb (mid) and US$42.00/lb (long).

In good news for uranium producers, the 2016 outlook published by the US Energy Information Administration last week revealed that renewables and nuclear power are presently the fastest growing energy sources globally. Renewable energy is expected to grow by a compound annual growth rate of 2.6% and nuclear by 2.3% out to 2040.

Nearly all of the projected net expansion in installed nuclear power capacity is accounted for by emerging markets, and led by China.
 

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By Greg Peel

The US Energy Information Administration last week reported US uranium mines produced a total of 3.7mlbs U3O8 equivalent in 2015, down 24% from 2014. Exploration drilling slowed by 13%, although exploration drilling expenditure rose 2%. Total US uranium concentrate production fell 33% to 3.3mlbs.

Despite the fall in US production, uranium prices continue to wallow. The flurry of activity sparked last month by the announced closure of Cameco’s Rabbit Lake mine and the removal of 5mlbs production from global markets has now died away, although sellers have remained reluctant to engage buyers at lower prices since the announcement.

Around the globe, uranium producers have been curtailing production ahead of hoped for uranium price rises sometime in the future. Energy Resources of Australia ((ERA)) is in the process of closing down its long-running Ranger above-ground mine and at this stage has decided not to go ahead with the development of the Ranger Deeps underground extension until market conditions are more favourable.

ERA last week announced it will fund the closure of the Ranger mine by selling down its uranium stockpiles, a process that is expected to last until 2020. The company’s processing licence expires in 2021, and on that basis management has decided to keep the option of developing Ranger Deeps open, despite a cost to the company of doing so of around $4m per year, and despite non-approval from indigenous landowners and ERA majority shareholder Rio Tinto ((RIO)).

On the demand side of the uranium market, market participants are starting to receive feedback on recently submitted mid and long term delivery contract tenders from utilities, industry consultant TradeTech notes, which could lead to an uptick in activity in coming weeks.

Last week saw five transactions concluded in the spot market totalling 600,000lbs U3O8 equivalent. Sellers backed off on offer prices as the week progressed and TradeTech’s weekly spot price indicator has risen US10c to US$27.60/lb.

There were no transactions recorded in term markets. TradeTech’s term price indicators remain unchanged at US$29.25/lb (mid) and US$42.00/lb (long).
 

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By Greg Peel

The announcement from Canadian uranium producer Cameco that it would be shuttering its Rabbit Lake mine, thereby withdrawing 5mlbs of material from the market, continued to reverberate early last week. But after an initial flurry of activity, buyers retreated to the sidelines once more as sellers lifted their offer prices, industry consultant TradeTech reports.

Participants also await settlement of various mid and long term contracts currently out to tender to provide some fresh price direction.

The week ended with 700,000lbs U3O8 equivalent having changed hands in the spot market, down from one million pounds the week before. TradeTech’s weekly spot price indicator fell US10c to US$27.50/lb and remained at that level for the end of April.

The month of April saw 27 transactions concluded in the spot market for a total of 2.8mlbs U3O8. It was a wild month, in which the spot uranium price plunged to an eleven year low of US$25.50/lb before rebounding sharply on Cameco’s and other production curtailment announcements.

April saw all of buyers, speculators and producers active on the buy-side but traders dominated both buying and selling, TradeTech notes. The consultant’s spot price indicator of US$27.50/lb for end-April is down US75c from end-March.

Six transactions were concluded in term markets in April, but only for the modest total of 1.4mlbs. TradeTech has reduced its term price indicators to US$29.25/lb mid-term, down from US$29.90 at end-March, and US$42.00/lb long-term, down from US$43.00.

Cantor Fitzgerald notes the average March quarter spot uranium price was lower than forecast given a lack of buying from utilities, who are only buying small volumes in an oversupplied spot market rather than securing contracts for the inventory they will need to cover their requirements going forward. Eventually utilities will have to make a move, Cantor believes.

With Cameco now joining many others in curtailing production, Kazakhstan shifting material into a uranium fund in anticipation of higher prices, and Japan restarting reactors, Cantor is assuming a "violent" move upwards in uranium  prices must soon occur as utility buying becomes more urgent and supply becomes more scarce.

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By Greg Peel

Australia’s listed uranium miners provided production reports last week for the March quarter. Paladin Energy ((PDN)) posted a 3% increase in uranium production at its Namibian mine over the previous quarter while Rio Tinto ((RIO)) posted a 7% reduction from the previous quarter from its Australian and Namibian operations, albeit representing a 57% increase on the March quarter last year.

BHP Billiton ((BHP)) posted a 38% increase in production at its Australian mine for the nine months to March over the same period last year, but the company took the opportunity to announce it has cut mining of all its major commodities bar metallurgical coal.

The world’s largest producer of uranium – Kazakhstan – has no plans to cut production but has announced the establishment of a “uranium fund”.  The country’s state-owned producer intends to deposit material into the fund for the next several years in anticipation of higher prices in the future.

Canadian producer Cameco is another company that would like to see higher uranium prices. Amongst the various production updates last week, news that Cameco is to shutter its Rabbit Lake mine, resulting in 585 lost jobs and reducing the company’s production profile by 5mlbs, had the greatest impact on the market.

Cameco suggested it will now take a more measured approach to future production, which includes slowing down the pace of expansion at the world’s biggest uranium mine – Cigar Lake – thus holding off on reaching full capacity. The company will instead focus on controlling costs while awaiting higher uranium prices.

The news came a week after the spot uranium price plunged over 10% as frustrated traders were forced to sell into a lack of any real buying interest. The removal of a large chunk of global production had traders scrambling back the other way last week. Utilities were spotted earlier in the week on the buy-side, industry consultant TradeTech reports, but the rush was on when the Cameco announcement hit the wires.

By week’s end ten transactions totalling 1mlbs of U3O8 equivalent traded hands in the sport market – a considerable jump on transaction volumes of the past several weeks. As a result TradeTech’s weekly spot price indicator has jumped back 8%, by US$2.10 to US$27.60/lb.

Two transactions were reported last week in term markets, totalling 500,000lbs U3O8. TradeTech’s term price indicators remain unchanged at US$29.90/lb (mid) and US$43.00/lb (long).

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By Greg Peel

Late last week a magnitude 6.2 earthquake hit Japan’s southernmost island, Kyushu, resulting in nine dead and more than a thousand injured and causing significant damage to homes and buildings. The only two reactors operating in Japan are on Kyushu, albeit 120kms away from the epicentre. No damage to Sendai units one and two is apparent but technicians are continuing their inspections nonetheless.

The quake was the biggest in magnitude to hit Japan since the 2011 quake that set off a tsunami and resulted in the Fukushima nuclear disaster. The Sendai units are the first and only reactors to have been restarted in that time. Even before last week’s quake hit, the second set of reactors slated for restart – Takahama units one and two -- remained idle due to a court challenge of the country’s nuclear authority’s conclusion the reactors did not pose a safety risk.

One presumes this fresh quake will not help that argument, even if the Takahama units are found to be completely unscathed.

The uranium market had been struggling to find any meaningful demand support prior to last week. Industry consultant TradeTech’s spot price indicator had already drifted down US75c through the week before plunging a further US$2.25 on Friday as traders scrambled to dump material. The price plunge did manage to spark some interest from utilities on the buy-side, such that six transactions totalling 600,000lbs U3O8 equivalent were concluded.

TradeTech’s weekly spot price indicator is down US$3.00, or 10.5%, at US$25.50/lb, representing the lowest level since April 2005. The spot price is now down 25% in 2016 and TradeTech’s spot price indicator has exhibited a negative compound annual growth rate of -14.9% over the past five years.

Only one small transaction was reported in the term markets last week. There remain a number of delivery contracts out for tender but action on the settlement front continues to be exceedingly slow. TradeTech’s term price indicators remain unchanged at US$29.90/lb (mid) and US$43.00/lb (long).

Meanwhile, China has announced it is on the hunt to buy nuclear assets in uranium-rich countries such as Kazakhstan, Canada and Australia. If the price is right.

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By Greg Peel

The World Nuclear Association and Nuclear Energy Institute hosted the annual World Nuclear Fuel Cycle conference last week in Abu Dhabi, ensuring light trading in uranium markets. Conference attendees were at least able to breathe a sigh of relief on news a High Court challenge to the first two Japanese reactor restarts was dismissed.

The Sendai units one and two are currently the only operating reactors in Japan, which once produced 30% of the country’s electricity needs from nuclear power. There are other reactors ready to restart but in each case hoops have to be jumped through to achieve approval from local and provincial governments and opposition against nuclear power remains strong in Japan. The process moves on at a glacial pace.

As such, conference attendees were lamenting the disappointment of Japan’s first reactor restarts having little impact on uranium prices. After all of Japan’s reactors were shut down in 2011, it was always assumed the restart process would spark a rebound in uranium prices from their post-Fukushima depths. But this has not been the case. Aside from the restart process moving painfully slowly in Japan, the world remains well-supplied with uranium either way.

Hence the market is devoid of any anxious end-user buying. Uranium traders and intermediaries have been hanging onto a belief since last year that utilities will soon need to enter the market but as each month goes by, utilities continue to sit on the sidelines.

One utility did pop its head through the spot market door late last week nonetheless, seeking offers for a spot delivery contract, industry consultant TradeTech reports. Otherwise only four transactions were completed totalling 450,000lbs U3O8 equivalent, with traders and intermediaries on the buy-side. The week before saw some frantic end of quarter selling from traders stuck with product, but the sellers were less desperate last week and as such, TradeTech’s weekly spot price indicator has risen US$1.00 to US$28.50/lb.

Utilities were also spotted in the mid-term delivery market, resulting in three transactions being completed. There are still several term market orders out for tender but still utilities seem in absolutely no rush to settle. TradeTech’s term price indicators remain unchanged at US$29.90/lb (mid) and US$43.00/lb (long).

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By Greg Peel

On the strength of volumes out to term contract tender one would expect uranium prices to be well supported at present, but indeed the opposite is true. Tenders remain outstanding from months ago and while lower prices have indeed encouraged more requests for proposal to appear from utilities in March, no one on the end-user side appears in any sort of hurry.

The uranium market, it would appear, remains well supplied. Only the prospect of lower prices is bringing in buying interest. That interest remains firmly rooted in term markets and not in the uranium spot market, where traders and intermediaries are fighting over diminishing volumes.

Volumes did at least tick up in March after a light start to 2016. Some 26 transactions were concluded in the spot market for a total of 3.5mlbs U3O8 equivalent, industry consultant TradeTech reports, up from 2.3mlbs in February. But with utilities taking a long time to assess pricing for term delivery contracts, spot market traders became increasingly frustrated over the course of the month and offloaded material at ever lower prices.

TradeTech’s spot price indicator closed the month at US$28.25/lb, down US$3.85 from February’s US$32.15/lb close. The consultant’s weekly spot price indicator fell further Friday, April 1, to US$27.50/lb, representing a US$1.90 week on week fall.

Transaction volume also increased in term markets in March but only to four transactions concluded representing 4.7mlbs U3O8 equivalent. Despite a decent volume still out to tender, TradeTech has been forced to lower its term price indicators once more. The consultant’s mid-term indicator has fallen US$4.00 to US$29.90/lb and long-term indicator has fallen US1.00 to US$43.00/lb.

The price gap to longer term indicative pricing reflects a greater reluctance from term sellers to reduce prices to meet demand, as is in the case in the spot market, given both orders outstanding and the ongoing assumption that more substantial buying interest will indeed soon emerge.

An assumption that has been held for many months now.
 

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By Greg Peel

After rebounding somewhat the week before, prices in the spot uranium market drifted down again early last week on a lack of immediate buying interest. The drift was nevertheless arrested when new interest entered the term market.

Interest continues to build in the term market, albeit buyers seeking significant volumes are clearly in no rush to settle contracts. There have been contracts awaiting settlement for over 20mlbs of U3O8 equivalent for some months now and prospective buyers continue to enter the market for mid and long term delivery, for volumes ranging from 100,000lbs to 2mlbs.

The spot market is seeing little end-user interest so traders and intermediaries continue to hold out for contract settlements in order to assess price direction.

Five transactions totalling 600,000lbs U3O8 equivalent were conducted in the spot market last week, industry consultant TradeTech reports. TradeTech’s weekly spot price indicator has fallen US20c to US$29.40/lb.

TradeTech’s term price indicators remain unchanged at US$33.90/lb (mid) and US$44.00/lb (long).

Some uncertainty was generated in the uranium market last week when the president of the world’s largest uranium producing nation – Kazakhstan – suggested his government may be about to take some drastic action against foreign operators in the country. Mr Nazarbayev warned asset may be reclaimed from mining companies which are not meeting their obligations with regard mine development.

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