By Greg Peel

It is a fact of life that if a market cannot find a reason to go up, it must ultimately go down. For six weeks the uranium spot market has seen a lack of any notable interest on the buy-side from utilities, which for the most part have found little reason to participate. Utilities have been active in the term delivery market but as the year winds down, they appear to be satisfied with their supply.

Nor has there been much evidence of producer activity in the spot market. Producers typically use the spot market to make-up shortfalls in contractual deliveries or occasionally sell unneeded material but they, too, have been quiet these past few weeks.

It has thus been left to the traders in the market – the intermediaries and speculators – to provide what little volume has changed hands these past several weeks. Last week it seems sellers became at bit anxious that the buy-side interest was unmoved and thus with year-end approaching, bit the bullet.

It mattered not that the historic Paris Agreement, signed last week, effectively endorses nuclear power as one alternative to fossil fuel energy. Nor that major producer Cameco suffered a rock fall that has for now suspended production at one of its mines. Last week was just about squaring up for 2015.

When the first seller blinked, the race was on. Eight transactions totalling 1mlbs U3O8 equivalent were concluded at successively lower prices as the week progressed, reports industry consultant TradeTech. By Friday the dust had settled and the spot uranium price had suffered its biggest weekly fall since April. TradeTech’s weekly spot price indicator is down US$2.50 at US$33.50/lb.

While utilities continue to submit tenders for delivery contracts, there were no transactions reported in the term markets last week. TradeTech’s term price indicators remain unchanged at US$38.50/lb and US$44.00/lb.

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By Greg Peel

Industry consultant TradeTech reports only two transactions concluded in the spot uranium market last week, and no transactions in term markets, which about sums up the level of excitement in uranium markets as we rapidly approach Christmas.

TradeTech’s weekly price indicator remains stuck at US$36.00/lb for the fifth week running. The consultant’s term price indicators are also unchanged at US$38.50/lb (mid) and US$44.00/lb (long).

As to what is going to drag uranium out of its malaise in 2016 is at this point unclear. There are, however, a handful of utilities with delivery contract tenders out in the term markets looking for settlement.

In corporate news, Australian uranium miner Toro Energy ((TOE)) has signed a heads of agreement with copper-gold producer OZ Minerals ((OZL)) whereby OZ will farm into the nickel potential of Toro’s Wiluna uranium project in Western Australia.

With the Prominent Hill copper-gold mine past the point of maturity and the Caraparteena prospect currently too expensive to pursue at spot metal prices, OZ Minerals has chosen to diversify into nickel as an alternative means of securing future growth, it appears. For Toro, the operational experience and funding provided by OZ will allow the company to concentrate its attention and funding solely on Wiluna’s uranium potential.
 

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By Greg Peel

One would be forgiven for believing the global uranium spot market decided at the beginning of November to simply shut down for Christmas early. Yet again industry consultant TradeTech’s weekly spot price indicator remains glued at US$36.00/lb, unchanged from the week before, and the week before that, and the week…

There were, nevertheless, five transactions concluded in the spot market last week, totalling 500,000lbs U3O8 equivalent. One utility entered the market for a small amount, but otherwise intermediaries and traders continue to provide what support there is on the buy-side, TradeTech notes. With the focus now apparently on 2016 requirements, there’s no real sign of life in the market as far as the rest of 2015 is concerned.

And after a flurry of activity late in November, the term market also went quiet last week. No transactions were recorded, although there remains a handful of utilities with feelers out. TradeTech’s term price indicators remain unchanged at US$38.50/lb (mid) and US$44.00/lb (long).

Amidst various tidbits of demand-side news last week, the highlight was the release of the goals set by China’s power industry as a result of the government’s latest Five Year Plan. China expects to have 110 nuclear reactors in operation by 2030, which would elevate the country to one of the largest global producers of nuclear power. By the end of 2020, the total electricity generating capacity of reactors both commissioned and under construction in China will reach 88GW.

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By Greg Peel

Canadian research house Raymond James believes the global uranium market will be in a state of structural oversupply for the next five years. But by 2020 the market will move into shortfall, as supply growth proves insufficient to keep pace with demand growth.

Production from new, and large, mines will be needed by this time, and Raymond James’ modelling of the demand/supply balance going forward supports a long term equilibrium price forecast for uranium of US$70/lb.

Uranium mining stocks, likely feeling the effects of market fatigue, remain disconnected from this reality, Raymond James contends. Thus many are offering “outstanding entry points” at this time.

To that end, we note stockbroker Canaccord Genuity has this week initiated coverage on Australian uranium start-up Vimy Resources ((VMY)).

As the nitty gritty of the UN Climate Change Conference in Paris continues for the next two weeks, Canaccord suggests the global focus on low emission base load power solutions has never been more apparent. The broker expects nuclear power to emerge as a key talking point at the conference. Despite the advances of wind, solar and hydro as clean power alternatives, Canaccord believes nuclear still offers the most functional “here and now” solution.

Reliance on nuclear power is on the increase. China, India and Russia are leading the charge on new reactor construction and Japan is forecast to increase its previously idled reactor utilisation from 2% now to 62% over the next five years. Canaccord forecasts a long-term uranium price of US$65/lb.

Vimy Resources has just completed a pre-feasibility study on its Mulga Rock project in Western Australia, which suggests a 3mlb per annum operation with a 17-year mine life. First production is at this stage targeted for 2018. The broker has initiated coverage of the stock with a Speculative Buy rating and a 70c target.

Meanwhile, back in today’s world, the uranium spot price continues to languish. Last week’s Thanksgiving break interruption in the US market ensured industry consultant TradeTech’s weekly spot price indicator remained unchanged at US$36.00/lb for the fourth week running, and unchanged at the end of November.

Total spot market volume fell to 3.5mlb in November from 5mlbs in October, TradeTech notes. Utilities are currently absent from the spot market, leaving intermediaries to represent the bulk of buying and selling. However while a drop-off in activity towards year-end is not unusual, a pick-up in term market activity, and requests for tenders, has meant spot market participants have been holding out to assess pricing direction as proposals are considered.

Term market activity was decidedly strong in November, TradeTech reports. Contracts totalling 17mlbs U3O8 equivalent were settled for delivery spans from as early as 2017 to as late as 2025. In contrast to the spot market, utilities were the major buyers.

Spot market activity will remain subdued until several term delivery contracts currently out for tender are settled, and pricing subsequently becomes apparent. Meanwhile, TradeTech has trimmed its mid-term uranium price indicator by US25c to US$38.50/lb, while leaving its long-term price indicator at US$44.00/lb.

Note that the “long term” price forecasts set by Raymond James and Canaccord Genuity above, of US$70 and US$65 respectively, are not comparable to TradeTech’s long term price indicator of US$44. TradeTech’s price reflects actual trading prices being set today for delivery over a longer term timeframe, for example out to 2025. The long term prices used by market analysts are forecasts into the future used to provide for the valuation of uranium mining stocks out to latter years.
 

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By Greg Peel

The week before last saw US markets punctuated by the Veterans Day part-holiday, while the coming week sees Thanksgiving on Thursday and market half-sessions either side. Little activity is expected in uranium markets.

And nor was there much going on last week, in between holidays. Industry consultant TradeTech reports six transactions totalling 700,000lbs U3O8 equivalent concluded in the spot market, with TradeTech’s weekly price indicator unchanged by week’s end at US$36.00/lb for the third week running.

Four transactions were reported in term markets last week but for a total of only 1.5mlbs. TradeTech’s term price indicators remain unchanged at US$38.75/lb (mid) and US$44.00/lb (long).

While the business of supplying existing nuclear facilities might be subdued at present, the business of expanding nuclear power capacity continues a-pace globally.

The UK government announced last week a plan to phase out coal-fired power plants not fitted with carbon capture capability. The government will instead champion natural gas and nuclear power options as a means of reducing the UK’s carbon emissions, while keeping an eye on consumer pricing. Plans to build new nuclear facilities are now well underway.

Meanwhile China has signed a deal to build and 85% finance a fourth and possibly a fifth nuclear power plant for Argentina. And Russia is set to finance and build a four-unit plant that will become Egypt’s first nuclear facility.

Thus in the bigger picture, global nuclear power is powering on despite plans from some European countries to phase out nuclear energy and despite what is a very slow process of restarting some but not all of Japan’s idled reactors.

In the short term however, most global utilities have now secured sufficient supply to see them through the northern winter and hence spot market activity is winding down for Christmas.

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By Greg Peel

Utilities were represented on the buy-side in the spot uranium market last week but activity was very thin, thanks largely to the mid-week Veterans Day holiday in the US. A mere four transactions were completed, industry consultant TradeTech reports, totalling 400,000lbs U3O8 equivalent.

TradeTech’s weekly spot price indicator remains unchanged at US$36.00/lb.

Utility interest is nevertheless evident, in both the spot and term markets. Offers are due this week for a US utility seeking 850,000lbs for delivery in February, another 800,000/lbs in September and additional quantities for delivery across 2017-21. Two other utilities were considering entering the spot market as the week came to a close, TradeTech reports.

No transactions were recorded in term markets last week but two utilities are awaiting offers for a total of over 6.2mlbs to be delivered across 2017-26, another is seeking 3.6mlbs across 2017-21 and another is seeking 10.5mlbs across 2017-2026.

TradeTech’s term price indicators remain unchanged at US$38.75/lb (mid) and US$44.00/lb (long).

The International Energy Agency last week released its annual World Energy Outlook report for 2015.

As the Chinese economy slows, the IEA predicts that by 2040, India will prove the world’s largest demand centre for every major constituent of the world’s energy mix – oil, gas, coal, renewables and nuclear. By 2040 China’s oil imports will be nearly five times that of the US, and India’s will exceed those of the European Union.

An Indian “super-cycle”?

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By Greg Peel

Last week saw President Obama draw the ire of the US oil industry by deciding not to approve the Keystone pipeline, which would carry oil from Canada right through to US Gulf refineries ahead of potential export to Asia and other markets. Environmental concerns, with an underlying climate change tone, were the major reason provided but US energy security and domestic pricing were also considerations.

The climate change theme is nevertheless working in the other direction for the US nuclear energy industry. As some of the country’s smaller and older reactors begin to struggle with economics, Obama has announced he is enacting steps to ensure nuclear energy remains an important component of the US Clean Energy Strategy. The Administration will offer support to a variety of nuclear research and development initiatives.

Meanwhile over in India, the government last week pared back its own nuclear energy ambitions, readjusting projected nuclear capacity forecasts to 14,500MW by 2024 from an earlier 63,000MW by 2032. India’s Department of Atomic Energy has qualified its reduction by insisting the initial target was more of an expression of intent than an actual forecast.

On the other hand, South Africa intends to move forward with the construction of new nuclear plants that could add up to 9,600MW in power capacity and in the UK, the government has approved the construction of a third reactor at the existing Heysham facility as part of that country’s push to renew and expand longstanding nuclear capacity.

Nuclear power industry talk in the post-Fukushima era has been dominated by not only Japan restart speculation, but of the potential demise of nuclear energy as a base power source across parts of Europe. Yet as analysts at Macquarie note, nuclear power has in fact been making a quiet global comeback. The Fukushima disaster of 2011 saw many plants shut down and expansion plans either delayed or shelved but the past two years have seen consistent year on year growth, Macquarie points out.

Total 2015 nuclear output is set to be the strongest since 2011 and despite ongoing downside risks in the West, the analysts believe capacity growth in Asia will ensure this trend continues on a five-year view, thus ensuring rising demand for uranium.

Such developments nevertheless remain far removed from the uranium spot market in the shorter term. Current action in that market comes down to long-awaited utility buying interest. Last week finally saw utilities come in to join intermediaries on the buy side after a period in which only intermediaries and traders were offering any market support.

A total of 750,000lbs U3O8 equivalent changed hands in the spot market last week, industry consultant TradeTech reports. The reappearance of end-users encouraged sellers to back off slightly, such that TradeTech’s weekly spot price indicator closed up US25c at US$36.00/lb.

Four transactions were reported in the term markets last week totalling 14mlbs for delivery over 2018-25, TradeTech notes. Utilities were the buyers in each case. Other utilities have entered the market seeking contract interest but in the meantime, TradeTech’s term price indicators remain unchanged at US$38.75/lb (mid) and US$44.00/lb (long).
 

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By Greg Peel

US uranium production dropped to 774,541lbs in the September quarter, down 2% from the June quarter and down 47% from the September quarter 2014. It was the lowest quarter of production since December 2005. Lower prices are blamed for the production cutback.

It has thus been a tough nine months of 2015 for Canada’s major global uranium producer Cameco, which reported C$75m in uranium profits to September, down from C$133m in the same period last year.

Prior to last week, several sellers had been sweating on feedback with regard outstanding supply offers to utilities and those who learned they’d been unsuccessful chose to hit the spot market instead. A total of seven transactions totalling 800,000lbs of U3O8 equivalent changed hands last week, industry consultant TradeTech reports, as sellers dropped their offer prices in order to attract buying interest.

TradeTech’s weekly spot price indicator fell by as much as US$1.25 as the week progressed, but buying interest did emerge from traders and intermediaries, and by week’s end the price had settled at US$35.75/lb, down US75c for the week.

October is often a volatile month for uranium prices and it has again proven the case in 2015.

More than 5mlbs of U3O8 equivalent was traded over October compared to 3mlbs in September, TradeTech reports. Early in the month a sharp rebound took the spot price to as high as US$38.50/lb and provided hope that perhaps, finally, global production cutbacks were beginning to have an impact. But alas, the rebound proved fleeting.

Ultimately October closed at US$35.75/lb, down from US$36.25/lb at end-September.

Fourteen transactions were concluded in the terms markets during October for a total of 9.3mlbs, TradeTech notes. More than one half of the volume represented buying from utilities. Earlier in 2015 a sizeable gap had opened up between the weekly spot price and mid- and long-term prices which discouraged end-users from entering the market. That gap has more recently tightened, and TradeTech notes there remains interest from utilities in term delivery contracts as the year winds down.

TradeTech has reduced its mid-term price indicator by US75c to US$38.75/lb, while its long term indicator remains unchanged at US$44.00/lb.

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By Greg Peel

The excitement of three weeks ago, in which industry consultant TradeTech’s weekly uranium spot price indicator jumped US$1.90, has now evaporated. The spot price fell back US50c two weeks ago and last week plunged another US$1.25 to US$36.50/lb. The US$1.90 weekly jump had been the largest since 2011.

Activity last week was relatively quiet, TradeTech reports. Six transactions totalling 700,000lbs U3O8 were completed, with each transaction settling at a lower price as the week progressed. Many buyers are reluctant to commit while several term market delivery tenders are still pending, thus sellers, which included producers and intermediaries, were forced to lower prices.

Three transactions were completed in the term markets last week, totalling 3.3mlbs for delivery over a three-year period. TradeTech’s term price indicators remain unchanged at US$39.50/lb (mid) and US$44.00/lb (long).

BHP Billiton ((BHP)) released its quarterly production report last week, in which it was revealed the completion of smelter maintenance meant a 34% increase in production over last September quarter at the company’s Olympic Dam mine.

In Japan, Shikoku Electric took a step towards the restart of its Ikata unit three reactor, having received the approval of the local mayor. Kyushu Electric’s Sendai units one and two are already up and running, representing Japan’s first two reactor restarts.

And as anticipated, last week UK prime minister David Cameron, in a joint press conference with visiting Chinese president Xi Jinping, confirmed China would invest in the Hinkley Point reactor to be built in the UK. The reactor is scheduled for start-up in 2025.

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By Greg Peel

Japan restarted its second reactor last week, with Kyushu Electric’s Sendai unit two firing up to join unit one.

The Chinese president will visit the UK next week and is expected to sign a deal for China and Electricite de France to build the country’s first new nuclear reactor in a generation.

On the other side of the coin, Swedish power companies have decided to close a total of four reactors in the country while a 43-year old reactor in the US will also be shut down.

On the supply side, Energy Resources of Australia ((ERA)) increased production at its Ranger mine in the September quarter but will now conduct a review of its business, given traditional landowners have indicated they would not support any extension of Ranger in the future.

ERA earlier decided to shelve its Ranger Deeps underground extension plans for the time being in response to low uranium prices, but had hoped to one day be able to proceed with construction were prices to improve. With traditional owners against the project and the company having no immediate plans to pursue it, a rethink is an obvious option. ERA’s two-thirds shareholder Rio Tinto ((RIO)) indicated its lack of enthusiasm for the project earlier in the year, suggesting only if the numbers could beat Rio's strict return criteria would the expensive project receive support.

After a burst of fresh demand from intermediaries sent the spot uranium price surging the week before last on strong volume, last week saw a lack of follow-through and a reluctance from either buyers or sellers to engage, industry consultant TradeTech reports. Spooking the market were reports of aggressive offers being made to a utility seeking 800,000lbs U3O8 for delivery next year.

By week’s end only four transactions had been completed in the spot market totalling 600,000lbs and TradeTech’s weekly spot price indicator has fallen back by US75c to US$37.75/lb following the previous week’s US$1.90 price jump.

One transaction was reported in the term market last week totalling 600,000lbs. TradeTech’s term price indicators remain unchanged at US$39.50/lb (mid) and US$44.00/lb (long).

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