Uranium Week: As You Were

Weekly Reports | Mar 07 2017

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By Greg Peel

Having enjoyed an uninterrupted rally of almost 50% from the December low, three weeks ago the spot uranium price fell -US$1.25 and two weeks ago another -US$2.50 to suddenly cut that rally to a mere 27%. If utilities had decided they were now sufficiently stocked, or decided that opportunistically low prices had now been and gone, things were looking grim.

Then last week the spot price rallied back US$2.50, to US$25.00/lb on industry consultant TradeTech’s weekly price indicator.

Of that move, the first US$1.25 occurred all on the last business day in February. Perhaps sensing a snap-back rally, traders and intermediaries made up the bulk of the buy-side in seven transactions for the week, pushing the price up a further US$1.25 by week’s end. We cannot call a resumption of the rally unless utility demand returns, but we may conclude that traders caught long with material a couple of weeks ago have managed to get out.

Otherwise, the wider picture has not much changed.

The uranium market is expected to remain well supplied through to 2020, according to the projections of the Kazakh National Wealth Fund (noting that Kazakhstan boasts the world’s largest reserves of uranium), as suggested in a report published February 27. While the Fund expects price action to continue to be volatile, spot price are projected to remain depressed around the low US$30/lb mark.

Not the sort of news to make one rush out and buy uranium on February 28, but the KNWF also suggested longer term prices will be supported by rising global demand meeting supply shortages, as very few new mines will be developed at such low price levels.

Kazakhstan’s state-owned producer has cut its own production target by -10% for 2017.  Canada’s Cameco was once the biggest single producer of uranium but spent 2016 cutting back operations. Such cutbacks may not be over yet, given the CEO last week declared the company “could look to make changes to our inventory position, our production profile and our purchasing activity”.

Cameco is currently in a dispute with the Tokyo Electric Power Company, which has cited force majeure six years after Fukushima in cancelling long term supply commitments. TEPCO is the operator of Fukushima, and clearly a significant customer for Cameco, given the suggestion the company will go hard at the Japanese in court.

Among Australia’s significant listed producers, the recent local earnings result season revealed BHP Billiton’s ((BHP)) Olympic Dam uranium mine suffered lower than expected production in the half due to maintenance issues, Rio Tinto’s ((RIO)) two-thirds owned Energy Resources of Australia ((ERA)) continues to only produce uranium from stockpiled ore, and Paladin Energy’s ((PDN)) financial survival will be dependent upon stakeholders accepting a proposed debt restructure, as the company’s African operations continue to burn cash at current prices.

The month of February saw 4mlbs U3O8 equivalent change hands in the uranium spot market in 27 transactions, TradeTech reports. Utilities were largely absent on the buy-side. February’s closing price of US$23.75/lb compares to US$24.50/lb at the end of January but the first three days of March have taken that price back up to US$25.00/lb.

TradeTech has lifted its mid-term price indicator by US$1.00 to US$28.75/lb, leaving its long-term price unchanged at US$35.00/lb.
 

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