Commodities | Apr 21 2009
By Rudi Filapek-Vandyck
Has the spot uranium market finally managed to break the spell from the Lehman Brothers inventory overhang?
Last week’s small price increase in the weekly spot price benchmark as set by industry consultant Ux Consulting -up US50c to US$40.50/lb- has been swiftly followed up by a bigger price increase by fellow-consultant TradeTech; up US$1 to US$41.50/lb. This would suggest yellow cake changing hands at US$40/lb earlier this month is likely to have been the bottom, at least for now.
Analysts at Canada-based Raymond James nevertheless warn investors should not get too excited just yet. The stockbroker’s uranium specialists describe their own position as ”near-term cautious” on uranium and when it comes to buying equities they’d advise investors remain “selective”.
Raymond James’ top picks in the uranium sector include Paladin ((PDN)) which also has a stockmarket listing in Toronto, Nufcor, First Uranium and Hathor.
Lehman Brothers confirmed last week what would have been the worst kept secret in the industry: following some minor initial sales, it still had about 500,000 lbs in U3O8 equivalent stored somewhere and as buyers had proved only interested in heavy discounts it had decided to put off any further sales indefinitely. While this has not completely removed the market overhang, it has taken away the short term threat of more selling pressure in the uranium market.
According to some sources Chinese buyers have recently entered the market and purchased more than 1 million lbs of product on the spot market, possibly adding to the short term positive momentum. Analysts at the aforementioned Raymond James, however, predict little movement in the spot U3O8 price in the weeks ahead.
Meanwhile, TradeTech reports the past week saw four transactions being concluded totaling just over 1 million pounds U3O8 equivalent. Moreover, reports the consultant, each of these four transactions appear to have been concluded at progressively higher prices.
Overall market activity has now picked up remarkably with TradeTech calculating total volume in deals done for the first three weeks of April now stands at over 4.3 million pounds U3O8 equivalent as compared to 2.2 million pounds for the entire first quarter of 2009.
The last time spot uranium prices had moved higher was in the fourth week of November last year.
TradeTech’s longer term price indicator has remained unchanged at US$70/lb.