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Uranium Week: Credit Risk

Weekly Reports | Mar 28 2017

An interesting new consideration has crept into spot uranium pricing, in a week which saw prices fall back once more.

By Greg Peel

Having risen by US$1.75 to US$25.75/lb the week before, last week saw industry consultant TradeTech’s weekly uranium spot price indicator fall back by the same amount to return to US$24.00/lb. Five transactions were reported totalling 700,000lbs U3O8 equivalent.

The spot price is currently experiencing a bout of volatility that is moving prices each week with the ultimate result of little progress. This likely reflects the fact utility buying interest has backed off somewhat since the price rebounded significantly from its December low, leaving the bulk of buying and selling to be conducted by intermediaries and speculators. Utilities are well stocked with material and were likely only buying opportunistically when prices were at their nadir.

But there are currently other elements at play, rendering the spot market not only volatile, but disparate. On the last day trade last week, reports TradeTech, transactions occurred at both US$24.25 and US$24.75 simultaneously.

Disparate simultaneous pricing is not unheard of, and typically relates to point of delivery. In years past it has not been uncommon for two different prices to be trading in the US and Europe for example, but even in the same market if a buyer requests a delivery point that differs from the seller’s preferred delivery point then the seller will charge a premium commensurate with the additional cost required.

However last week saw another element at play. Delivery points aside, sellers were also adjusting prices on the basis of a buyer’s perceived credit risk. The greater the risk, the greater a price premium required.

Sign of the times, in what is still a historically low uranium price environment?

China's Carbon Emission Reduction

In other news last week, the International Energy Agency reported global carbon emissions totalled 32.1bn tonnes in 2016 – the same level as 2015 and of 2014, despite global economic growth. China, for one, managed to reduce emissions by -1% last year as its economy grew 6.7%.

China is leading the global push to reduce carbon emissions. It would be nice to think Beijing’s motives were purely altruistic but the major driver of such a push is China’s own, significant air pollution problem. Just recently, the last coal-fired electricity plant in Beijing shut down.

China is replacing coal-fired generation with a mix of renewable, nuclear and natural gas energy sources. China’s industrial and building sectors are being forced to switch to gas from coal to satisfy new strict emission regulations.

The growth in global nuclear energy capacity in 2016 was the greatest it has been since 1993, the IEA reports. New reactors were brought into service in China, India, Pakistan, Russia, South Korea and the US.

There were no transactions reported in uranium term markets last week. TradeTech’s term price indicators remain unchanged at US$28.25/lb (mid) and US$35.00/lb (long).

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