By Greg Peel

To date, the only two Japanese reactors to have satisfied all new safety requirements and received regulatory approval for restart are Kyushu Power Co’s Sendai units 1 and 2. It’s been a long road to this point, with a previous court ruling sending Kyushu back to the drawing board to address community fears for their safety were the reactors to be subject to earthquake, terrorist attack or some other high-level misadventure.

But Kyushu did satisfy these requirements, as far as the regulator and local courts were concerned, and despite lingering public protest it is expected Sendai unit 1 will restart in July and unit 2 will follow some months later.

The next reactors to satisfy regulatory requirements were Kansai Power Co’s Takahama units 3 and 4, although no restart time had yet been suggested. And last week it was the turn of Shikoku Power Co, which received approval to restart its Ikata plant. This is particularly good news for Shikoku given Ikata represented about 40% of the company’s pre-Fukushima electricity production.

But just when all was looking rosy for the government and nuclear power supporters, the Fukui district court has dealt a blow by upholding an injunction banning the restart of Takahama units 3 and 4. While the Japanese Nuclear Regulation Authority was forced to further tighten its safety requirements in the wake of the initial ruling against Sendai, the Fukui district court clearly has its own ideas of what’s safe and what’s not.

The court described the NRA’s guidelines as “too loose” and “irrational”.

So it’s one step forward, two steps back for the Japanese nuclear power industry, as it has been since the Abe government first pushed to revive nuclear energy post-Fukushima. While the government has greatly benefitted from the fall in oil and gas prices, the level of exports of fossil fuels required to substitute for lost nuclear power are greatly restricting the government’s attempts to revive the Japanese economy.

And while this was not good news last week for the global uranium industry, further bad news was to arrive in the form of a report by Tokyo Electric Power Co outlining its intentions to minimize further accumulation of uranium inventories.

Given utilities purchase uranium almost exclusively through long term delivery contracts, TEPCO has been forced to continue building its inventories even as its reactors have been shut down. The company had previously announced it was talking to its contracted suppliers about what options it might have, but given the first reactor restarts are nigh, the market was likely hoping contract cancellations were not a likely outcome.

Unfortunately, that’s exactly what TEPCO is trying to do.

There were six transactions totalling 600,000 pounds of U3O8 equivalent concluded in the spot uranium market last week, industry consultant TradeTech reports. Prices were net weaker over the period as the market absorbed the TEPCO news. TradeTech’s weekly spot price indicator has fallen US40c to US$35.25/lb.

There were three transactions concluded in the mid-term market last week, but only for small amounts. TradeTech’s term price indicators remain unchanged at US$40.25 (mid) and US$49.00/lb (long).
 

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By Greg Peel

US commercial nuclear plants purchased 53mlbs of U3O8 equivalent from domestic and foreign suppliers in 2014 at an average price of US$46.16/lb, according to the US Energy Information Agency's annual marketing report. Those numbers in 2013 were 57mlbs at an average of US$51.99/lb.

Only 6% of US purchases were supplied by US uranium producers. Of the balance, 39% came from Kazakhstan, Russia and Uzbekistan and 38% from Australian and Canadian domestic production, while the remaining 17% was split between several countries including Brazil, China, Czech Republic, Malawi, Namibia, Niger, South Africa, Ukraine and the UK.

In other market news, China's second largest nuclear plant operator, CNNP, has received government approval to list on the Shanghai stock exchange. CNNP is looking to raise some US$2.6bn in order to help China boost nuclear power generation and cut pollution.

The Japanese government's pro-nuclear stance has been vindicated by endorsement from a panel of experts who agree nuclear power remains the cheapest source of electricity within the country, despite the additional safety costs imposed on nuclear plants in the wake of Fukushima. In deference to public fears over nuclear safety, the Japanese government has wound back its targeted proportion of electricity supply from nuclear energy from a pre-Fukushima 30%. However it does plan to return to a level of 20-22% by 2030.

The first week of May saw a slight bounce in the price of spot uranium following its sharp fall at the end of April, as lower prices enticed a few utilities out of the woodwork. But renewed interest proved short-lived, industry consultant TradeTech reports, as activity in the market once again slowed last week.

Six transactions were conducted in the spot market totalling 700,000lbs of U3O8 equivalent, with prices slipping as the week progressed. TradeTech's weekly spot price indicator has fallen back US35c to US$35.65/lb, having risen US50c the week before.

There were three transactions conducted in the mid-term market last week, but only for small amounts. TradeTech's term price indicators remain unchanged at US$40.25/lb (mid) and US$49.00/lb (long).

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By Greg Peel

After watching the spot uranium price suddenly fall rather precipitously towards the end of April, the uranium market was last week met with the news the US Energy Secretary had decided transfers by the Department of Energy did not have an adverse effect on the industry.

This would have been disappointing for the US enrichment industry in particular, whose legal challenge led to the Secretarial determination. In order to fund the environmental clean-up of the Portsmouth Gaseous Diffusion Plant, the DoE has been selling portions of government inventory into the market at regular intervals. The department has also been down-blending highly enriched uranium into low-enriched uranium for security purposes.

The Energy Secretary determined such activity did not have a materially adverse impact on the US uranium production, conversion or enrichment industries. But having said that, the Secretary did suggest the pace of uranium transfers should be slower in future.

This compromise may have provided some comfort but it otherwise appears the sharp price drop in April, including US$3.00 in the final week, was enough to bring the buyers out from hiding. Seven transactions were concluded in the spot market last week, industry consultant TradeTech reports, totalling 1mlbs of U3O8 equivalent. Prices rose during the week only to consolidate somewhat by week's end when sellers re-emerged.

TradeTech's weekly spot price indicator has risen US50c to US$36.00/lb. Utilities were among the buyers.

Three transactions involving small quantities were reported in the mid-term market last week. TradeTech's term contract price indicators remain unchanged at US$40.25/lb (mid) and US$49.00/lb (long).

Uranium price weakness over 2014 does not seem to have deterred US uranium producers, who produced 4.9mlbs of U3O8 over the year, TradeTech reports, representing a 7% increase on 2013. Where the impact of lower prices was felt, nonetheless, was in exploration spending. It fell to US$11m in 2014, down 50% from 2013.
 

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By Greg Peel

As recent Uranium Week reports have noted, utilities have been expected to enter the market to purchase material for some time now but have not shown any urgency. Spot prices have thus slipped away from an earlier peak. Last week the market was disrupted when a US utility entered the market to actually sell a block of inventory, sending prices tumbling.

Lower prices did encourage some utilities and producers to enter the market as buyers, industry consultant TradeTech reports, but not in sufficient volume to offset downward price pressure. TradeTech's spot price indicator closed the month of April at US$36.00/lb, down from US$39.40/lb at end-March. The end of last week saw a further fall of US50c to US$35.50/lb, which implies a week-on-week fall of US$3.00/lb.

A total of 23 transactions representing 4.1mlbs of U3O8 equivalent were conducted in April, TradeTech reports. Deals were completed at successively lower prices. Sellers were mostly intermediaries and producers but utilities were also seen on the sell-side.

Lower prices also enlivened the term contract market, TradeTech notes, in which nine transactions totalling over 14mlbs of U3O8 equivalent were conducted for various delivery windows stretching from 2016 to 2025. Utilities from the US, Europe and Asia dominated the buying. While factors such as geopolitical risk, financial stability, diversity, and source of production and/or supply are always taken into consideration by buyers when inviting suppliers to submit offers, these issues are particularly evident at the present time, TradeTech reports.

This has led to disparity in pricing across term contracts, and a preference for medium term contracts over longer term from the sellers. This has resulted in TradeTech reducing its mid-term price indicator to US$40.25/lb from US$43.50/lb, while the consultant's long term indicator falls by a lesser degree to US$49.00/lb from US$50.00/lb.

News over the month included Japan moving closer to its first reactor restarts, India entering the uranium market as a buyer, and the legal battle continuing in the US over intended Department of Energy inventory sales. The latest news is that Sweden's state-owned energy company is now planning to shut down two reactors, in 2018 and 2020 – seven years earlier than previously planned.
 

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By Greg Peel

Prague hosted the annual World Nuclear Fuel Cycle conference last week, drawing attention away from uranium markets earlier in the week. A lack of buying interest saw sellers prepared to lower prices to conclude transactions and activity hotted up towards the end of the week, industry consultant TradeTech reports.

Six transactions totalling 600,000lbs of U3O8 equivalent changed hands but all the buying was conducted by intermediaries, with utilities remaining on the sidelines. TradeTech's weekly spot price indicator has fallen US40c to US$38.50/lb.

At the conference, attendees learned that an eleventh hour attempt at an injunction preventing the restart of the Sendai one and two reactors in Japan was rejected by the local district court, removing another obstacle in the way of a planned start-up possibly in early June. Protesters are concerned about the safety of the reactors in the event of earthquake or the eruption of a nearby volcano, but the court was satisfied with rigorous new safety requirements.

In further news, the US and China have renewed a commercial nuclear cooperation agreement which allows for the transfer of material, reactors, components, information and technology between the two countries for nuclear research and power production. The deal provides "a comprehensive framework for peaceful nuclear cooperation with China," said President Obama, "based on a mutual commitment to nuclear non-proliferation".

And in the US the controversy over Department of Energy enriched uranium sales continues, with a Congressional committee now attempting to determine if DoE sales are in fact illegal and assessing what impact the sales have on the US uranium industry. Members of Congress argued that not only is the impact negative on US producers, the sales program fails to ensure the DoE maximises the value of its asset.

As ever, the expectation is for more utilities to enter the uranium term contract market shortly. Last week saw one utility concluding its evaluation of tenders for 2mlbs to be delivered over 2018-21, while another utility is expected to issue a request for proposal next week.

TradeTech's term price indicators remain unchanged at US$43.50/lb (mid) and US$50.00/lb (long).

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By Greg Peel

Interest in the uranium spot market has slowed to a trickle these past couple of weeks, as buyers and sellers show little interest in meeting on price. Industry consultant TradeTech reports only three transactions totalling a modest 300,000lbs were concluded in the market last week.

TradeTech's weekly spot price indicator has slipped US10c to US$38.90/lb.

If there was little trading activity last week there was plenty of news, the highlight being an announced five year, 7.1mlb deal for Canada, via global uranium giant Cameco, to supply uranium to India for the purpose of electricity generation. India is rapidly building a fleet of nuclear power plants.

Australian foreign minister, Julie Bishop, expects a similar deal to be in place between Australia and India by year's end. Australia boasts 32% of the world's uranium resources but exports only 11% at this stage. Exports to India remain controversial given the country is nuclear weapons capable but not a signatory to the global Non-Proliferation Treaty.

The news from Japan was not so encouraging. While Sendai units one and two remain very close to re-start, a Japanese court has ordered a halt to plans to restart Takahama units three and four given safety concerns. It's the first time the courts have become involved in the restart process.

The pending restart of the first Japanese reactors is one reason why the uranium price has risen in 2015. Indeed, uranium is currently the best performing of all mined commodities, having risen 10% year to date and 18% year on year. Macquarie has taken the opportunity of the Canada-India supply deal news to review its uranium market outlook.

The deal leads Macquarie to forecast a smaller production surplus by year's end than previously, but the broker notes the uranium market is still in significant oversupply. Already substantial inventories continue to build. While some supply cuts were forthcoming last year due to lower prices, Macquarie believes the spot price needs to retrace from here for any further supply cuts to be triggered.

The price also needs to be lower to encourage any strategic stocking from governments. All up, Macquarie sees near-term risk for the spot uranium price to the downside.

Meanwhile, the term uranium market continues to tick over quietly with one US utility selecting a preferred supplier last week of 2.3mlbs for 2018-11 delivery, and another still evaluating offers on a 2.0mlbs 2018-21 deal. Several utilities are currently evaluating potential purchases, TradeTech reports. The consultant's term price indicators remain unchanged at US$43.50/lb (mid) and US$50.00/lb (long).

Research from TradeTech reveals that over the period 2004-14, purchases by utilities have remained fairly static at an average 8.8mlbs per year. Producer purchases, which are occasionally needed to satisfy term supply contract obligations, have fluctuated from 1mlbs to 10mlbs per year over the period, averaging 5mlbs per year.

The difference in volumes comes from the speculative side of the market. In 2004, uranium traders and financial investors purchased 2mlbs and in 2011 – the year of the Fukushima disaster -- they purchased 30mlbs. Last year that figure was still strong at 28mlbs.

If the spot uranium price is to fall back, it will need nervousness amongst speculators to do so.

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By Greg Peel

The Japanese Nuclear Regulation Authority announced last week it was “very close” to finalising its review of the Sendai units 1 and 2, which will be the first reactors to restart since the 2011 Fukushima disaster.

The restart of Japanese reactors will occur over a long period of time and the country will not fully restore its previous nuclear capacity, which provided around 30% of the country’s electricity supply. Aside from those reactors damaged beyond repair in the 2011 tsunami, others will be abandoned given the prohibitive cost of bringing them up to the new safety standards required by the regulator.

Nor does the Japanese government intend to return to 30% nuclear. Shinzo Abe is balancing popular opposition in Japan to nuclear energy per se with his country’s need to supplement the crippling cost of fossil fuel imports (albeit now a lot cheaper) if the economy is to be restored to growth. Last week the ruling party proposed to the prime minister that Japan generate 60% of its electricity from “stable” sources, which include nuclear but not less reliable renewables. However, renewables will form a significant part of Japan’s future energy mix.

Japan’s Ministry of Economy, Trade & Industry is reportedly considering a mid-20% level of renewable sources in the mix, up from 11% in FY14, and at least 20% nuclear.

One might assume news that the first Japanese reactor restarts are close provided a boost for the uranium market last week but this was not the case. Ostensibly, it is not “new news”, with mid-2015 long assumed as the first restart timetable by the market. Indeed, industry consultant TradeTech reports keen interest from the sellers last week, who became more aggressive on their offers as the week progressed.

Several transactions were concluded in the spot market towards the end of the week, and TradeTech has subsequently lowered its weekly spot price indicator by US30c to US$39.00/lb.

Two utilities continue to consider term delivery contract offers for a net 4mlbs of U3O8 equivalent, TradeTech reports, but there no were no term transactions concluded in the market last week. The consultant’s term price indicators remain unchanged at US$43.50/lb (mid) and US$50.00/lb (long).
 

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By Greg Peel

Spot uranium volumes traded in the month of March reached 7.8mbls of U3O8 equivalent, industry consultant TradeTech reports, up from 3.0mlbs in February. Volumes for the March quarter reached 15.2mlbs compared to 9.0mlbs in the March quarter last year.

Aside from official volume increases there has also been an increase in off-market spot transactions directly between interested parties.

The increase in volumes is largely due to several transactions being recorded for significantly larger quantities than is typical for spot market transactions, TradeTech notes. Large volumes are usually reserved for term delivery contracts, leaving the spot market to cover shortfalls around the edges and to facilitate speculation.

While spot prices trended quietly upward in the month of March, larger volume parcels on offer created some downward pressure. But they also sparked interest from utilities, who have been mostly sitting on the sidelines in the post-Fukushima years. TradeTech’s spot price indicator closed at US$39.40/lb for the month, up US90c from end-February. In the first couple of days of April, pre-Easter, the price has ticked down US10c to US$39.30 for week’s end.

The uranium market has been expecting utility interest to return for several months now but it has proven a slow process. Only two transactions involving less than one million pounds each were concluded in the term markets in March but two US utilities did enter the market looking for mid and long term contracts, and more are expected to follow.

Interest is more active in the mid-term market, TradeTech notes, where sellers are more willing to compete on offer prices. They are less willing to reduce longer term prices, hence a price gap persists. TradeTech has raised its mid-term price indicator by US1.00 to US$43.50/lb at month’s end while leaving its long-term indicator unchanged at US$50.00/lb.
 

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By Greg Peel

The UAE is progressing on its nuclear energy plans, on track to start up its first reactors in 2017. Jordan is set to sign a deal with Russia to build that country’s first nuclear power plant. South Africa is negotiating with builders for its second nuclear plant, while Russia has signed a deal to provide enriched uranium for India’s Tarapur plant.

It’s all happening on the demand side of the uranium market. The most dominant influences on the demand side this year have nevertheless been the pending restart of Japanese reactors, and the ongoing reactor build program in China. It is these two influences that JP Morgan suggests are behind the 40% rally in the spot uranium price from mid-2014, from US$28/lb to US$39/lb today.

JP Morgan believes these factors will continue to tighten the global uranium market in the short term. The first Japanese restarts are expected around June and China’s reactor count is expected to rise from 19 in 2014 to 27 in 2015 and 35 in 2016 before exceeding 50 by the end of the decade. That’s the good news.

The bad news, beyond the fact countries such as Germany are looking to shut down their nuclear reactors altogether, is that both Japan and China have been big buyers of uranium at low price levels. Japan already has stockpiles of material sitting unused since the 2011 tsunami but has continued to buy more recently, possibly assuming low prices will evaporate once the first reactors come back on line. China makes the point of stockpiling any commodity when prices are low, then drawing down inventories when prices are high.

The point here is that JP Morgan believes tightness in the uranium market will prove short-lived. Once prices climb higher, Japan and China will stop buying for the time being. If prices trade too high, such as to US$80/lb, new global supply will be incentivised. The broker has set its average uranium price forecasts at US$42/lb in 2015 and US$50/lb in 2016 but back to US$45 in 2017. The broker’s long term price forecast remains at US$75/lb, but the start date for this assumption has been pushed out to 2020.

There were eight transactions recorded on the spot uranium market last week, industry consultant TradeTech reports, totalling 2.5mlbs of U3O8 equivalent. That’s up from 800,000lbs the week before. TradeTech has set its weekly spot price indicator at US$39.40/lb, down US10c from last week. However, this is very much an “indicative” price given several transaction parameters at play.

Prices varied widely last week, TradeTech reports, dependent on delivery schedule, origin of material, form of material, and delivery location. Utilities, producers and speculators were all seen on the buy-side while producers and intermediaries made up the sell-side. The buyer of 2mlbs of material in the term market will choose a seller this week, while another utility has entered the market seeking offers and expectations remain that more utilities will move in coming months.

TradeTech’s term price indicators remain unchanged at US$42.50/lb (mid) and US$50.00/lb (long).

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By Greg Peel

The battle between US uranium producers and enrichers and the US government, in the form of the Department of Energy, continues, with the DoE now taking a more conciliatory approach. Having last year angered the US uranium industry by dumping excess inventory onto the market, and drawn legal action as a response, the DoE has since called for suggestions and last week released a wide-ranging set of responses.

These included suggestions of an annual sales quota, a postponement of sales initially, sales only to already matched up buyers and so forth. The bottom line is that while the global uranium market has improved, it remains fragile. The US government began offering inventory into a uranium market last year which was wallowing at price lows, just as producers across the globe were curtailing production and battling negative cash flow. It is not hard to see why US uranium producers were angry.

As to how the DoE now proceeds is anyone's guess, but presumably the department will be more considerate of prevailing market conditions.

On the other side of the coin, the endless testing regimen required of those Japanese reactors hoping to shortly restart continues to progress, with Kyushu Power's Sendai unit1 having received approval for construction work upgrading the unit's design to meet higher safety standards. This ticks the box on the second of a three-step process required before restart will be permitted.

Four other Japanese utilities have nonetheless weighed up the cost involved in upgrading their reactors to meet the tough new post-Fukushima safety standards and decided that for five reactors between them, the benefits will not justify the cost. Those reactors will thus be decommissioned.

Utilities and intermediaries were on the buy-side and producers and intermediaries on the sell-side of the eight transactions totalling 800,000lbs U3O8 equivalent completed in the spot uranium market last week, industry consultant TradeTech reports. Market sentiment fluctuated during the week, to the point the bid/offer gap stretched as wide as US$1.50/lb, but the week nevertheless ended on a stronger note. TradeTech's weekly spot price indicator has risen US40c to US$39.50/lb.

Two transactions were reported in the mid-term market for moderate quantities, and offers are due next week for a US utility seeking 2mlbs for 2018-2022 delivery. TradeTech's term price indicators remain unchanged at US$42.50/lb (mid) and US$50.00/lb (long).
 

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