Uranium Week: Buying Interest Fades

Weekly Reports | Feb 21 2017

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By Greg Peel

As the uranium spot price continued to fall without relief last last year to multi-year lows, analysts assumed that at some point uneconomical prices would force sufficient supply reduction to turn prices around. It is unlikely any analysts perceived a price as low as US$17.75/lb as the turning point, but since hitting that level in early December the spot price has done nothing but rally ever since.

While supply curtailments have been announced across the globe by various miners in past months, it was an announced -10% reduction in 2017 production from Kazakhstan’s state-owned miner that rang the bell. The extent of reserves in Kazakstan makes that country a global swing producer to the extent OPEC once controlled oil markets. Since early December to two weeks ago, the spot uranium price rallied 49% without one single weekly pullback in price.

Utilities across the globe remain well stocked with uranium, yet prices at historically low levels have been too good to pass up. Speculative interest was also reignited by price momentum. But at some point all good rallies must come to an end.

Last week saw buying interest finally starting to fade. Sellers tried to test buyers with lower prices but still found indifference, given demand remains discretionary rather than urgent. Only four transactions totalling 550,000lbs U3O8 equivalent were concluded during the week, industry consultant TradeTech reports. The consultant’s weekly spot price indicator has fallen US$1.50 to US$25.00/lb.

There were two transactions concluded in uranium term markets last week. TradeTech’s term price indicators remain unchanged at US$27.75/lb (mid) and US$35.00/lb (long).

Reduced supply has driven uranium’s bounce-back from the brink. But how is the demand-side looking?

Japanese company Toshiba last week announced a US$6.3bn write-down of its US-based CB&I Stone & Webster nuclear construction and services business. Aside from admitting poor project management, the company cited a lack of global near term demand for nuclear power. Management also admitted it had overestimated the value of the company’s projects at the time of acquisition.
 

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