article 3 months old

Uranium Still Looking For A Bottom

Commodities | Oct 30 2012

By Andrew Nelson

Let’s add up some numbers. The Megatons to Megawatts Program, the program that sees Russia convert uranium taken from Soviet era warheads and supply it to the US, is supplying around 50% of the US's uranium demand. Mining accounts for eight percent. The electricity for roughly one in ten American homes, businesses, schools and hospitals is generated by Megatons to Megawatts fuel.

The US nuclear reactor fleet required 55 million pounds of uranium to keep running in 2011, while the mined supply of uranium in the US in 2011 was about four million pounds. Megatons to Megawatts ends this year and mined supply certainly isn’t pacing itself to pick up the slack, given uranium prices that are becoming increasingly sub-economic for a growing number of producers.

And here’s another bit of news: China is set to approve a small number of nuclear power projects by 2015 in its push to steadily get back to a normal schedule of building nuclear power facilities. New plants are to be built based on the strictest global safety standards and conform to third-generation safety requirements, the Chinese government said.

Here’s the funny thing, there is absolutely no shortage of uranium in the ground. What is in short supply is mined uranium. Starting very soon, and continuing for at least as long as is needed to develop, permit and construct new uranium mines, there is going to be a big significant shortfall of uranium supply.

But that’s all tomorrow. Last week, uranium continued on its slow and steady march southward. Turnover was light, with just 500,000 pounds changing hands. The announcement from China did get plenty of play, but it still did little to inspire optimism about the prospect for an increase in near-term uranium demand.

Industry consultant TradeTech notes that market participants are increasingly hopeful the price may be approaching a bottom and are thus considering whether to enter the market.  Yet at the same time, buyers remain hesitant to commit to purchases until the price either stabilises or shows signs of going back up.

In the meantime, while sellers aren’t exactly falling over themselves to get stock out to the marketplace, they’re still being forced to lower offer prices to get deal done given there remains, for the time being, more than sufficient supply to soak of the currently low levels of spot demand.

By Friday, TradeTech’s Weekly U308 Spot Price Indicator was at US$43.00 per pound, down US$0.50 per pound from the week prior.

No transactions were reported last week on the term uranium market, although some new demand did emerge. TradeTech reports one US utility entered the market looking for offers for material to be delivered between 2014 and 2019. In the meantime, TradeTech’s Mid-Term U3 O 8 Price Indicator stayed put at US $50.25 per pound and the Long-Term Indicator stayed put at US $61.00 per pound.

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