Commodities | Jun 28 2011
By Greg Peel
At the end of May it was confirmed that trading company Traxys had agreed to acquire the entire 5.2mlbs of U3O8 equivalent which the US Department of Energy was set to sell, gradually, to clean-up contractor Fluor-B&W by means of payment. At the same time, a bill proposing the re-enrichment and sale of government-owned tailings to provide further clean-up funds was introduced to Congress.
In the meantime, Germany has joined Switzerland in announcing the gradual phase-out of nuclear power, Italy has voted against increasing nuclear capacity and a large number of Japanese reactors are now off-line pending safety inspections. There are fears some will never come back on line.
These developments all add to to a reduction in uranium demand and an increase in spot uranium supply beyond the norm. What does Traxys intend to do with its 5.2mlbs? That is unclear. Industry consultant TradeTech notes that spot uranium demand was weak last week as participants continue to monitor supply-side issues. There is also the potential for new supplies from producers and hedge funds to enter the market in coming months, TradeTech reports.
Last week saw four transactions in the spot market totalling 500,000lbs. A utility seeking 200,000lbs for July delivery has also selected a supplier. Sellers are finding it increasingly difficult to entice cautious buyers, TradeTech suggests, and have begun to lower prices in order to conclude deals.
Despite the caution, TradeTech's weekly spot price indicator fell only US15c last week to US$54.10/lb. The consultant's mid-term contract price indicator remains at US$60/lb and the long term at US$68/lb.