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Uranium Week: Momentum Vanishes

Weekly Reports | Feb 28 2017

By Greg Peel

If this year’s uranium price rebound has not ended, it has certainly stalled for now. On a lack of buying interest, industry consultant TradeTech’s weekly spot price indicator fell -US$2.50 last week to US$22.50/lb, following a -US$1.50 fall the week before, which was the first since a bounce off the December low.

Suddenly a price rebound of almost 50% is now only 27%.

Industry data continue to suggest utilities across the globe have no desperate need to buy more material, having been sufficiently stocked for some time. Recent buying interest from end-users has been more about taking advantage of multi-year low prices which may not last forever if supply-side curtailments continue. Sensing a long-awaited recovery, speculators did their bit to create the sharp price rebound of early 2017.

Speculators are now stuck with positions as the buyers back off again, and despite the rebound in the spot price, most operating mines across the globe continue to burn cash at these levels. TradeTech reports only three transactions concluded in the spot market last week, totalling 300,00lbs U3O8 equivalent.

There was mixed news on the demand-side front last week.

The saga of US legacy reactor shutdowns continues. As any potential support for the industry in each state must come from the state government, not the federal government, the issue of non-competitive nuclear power must be dealt with on a state by state basis.

This time it was Ohio’s turn to contemplate the impact cheap gas-fired electricity is having on both nuclear and coal-fired generation. FirstEnergy will consider the sale or closure of two nuclear reactors in the state after the company reported a significant quarterly loss which included write-downs for both nuclear and coal-fired assets.

FirstEnergy has challenged the Ohio government to create “zero emission credits” to acknowledge the fact that, like renewables, operating nuclear reactors do not emit any carbon. Gas-fired plants do emit carbon, albeit less so than coal-fired.

Meanwhile over in Japan, another two reactors have satisfied new post-Fukushima safety standards, paving the way for their restart. Interestingly, Kansai Electric’s Ohi units 3 and 4 are located on the Sea of Japan coast.

To date, twelve Japanese reactors have achieved safety approval level but only five have made it all the way to restart, and two of those are currently shut down for maintenance.

Kansai Electric now has to jump through the hoops of local government approval, which has so often been the stalling point for restarts given the protests of local residents. No doubt anticipating such a protest, particularly on the coast, Kansai will first construct a tsunami-proof wall to protect the reactors.

It will need to be a bit bigger than the one at Fukushima.

TradeTech’s term price indicators remain unchanged at US$27.75/lb (mid) and US$35.00/lb (long).

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