Uranium Week: Utilities Return, Price Rises

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By Rudi Filapek-Vandyck

Global dynamics for uranium and uranium producers continue to improve with price momentum turning positive ahead of the Nuclear Energy Institute's Nuclear Fuel Supply Forum in Washington, DC next week. Industry consultant TradeTech also reports US utilities, who largely held off from purchasing anything in December, are noticeably more present in January, a fact that hasn't gone unnoticed in the camp of uranium sellers either.

TradeTech reports by the end of the week a gap had opened up between buyers and sellers in the uranium spot market. Sellers had been gradually increasing their price expectations throughout the week while buyers turned more cautious, unwilling to overpay. Because of this gap widening, overall activity for the week was a lot busier at the beginning of the week but virtually non-existent by Friday.

All-in-all, TradeTech's spot price indicator jumped by US$0.75 to end the week at US$36.15/lb. This compares with US$35.50 on the final day of 2014.

TradeTech suggests several utilities are considering purchases after postponing entry into the market in December, which should bode well for the remainder of the month, possibly for the remainder of Q1.

The prior week saw two US producers announcing a "merger" to create what shall become the largest producer of uranium in the USA. If the current proposal receives approval from shareholders in respective companies, Energy Fuels and Uranerz will merge on 45/55% ownership terms.

Prior to the merger announcement, the spot uranium market went "exceptionally quiet" with total transaction volume for the month shrinking to no more than 2.9m pounds of U3O8 equivalent. TradeTech suggests this was a direct response to a rather frenzied November month when transaction volume surged to 5.7m pounds U3O8 equivalent and the spot price reached as high as US$44/lb. This remains the highest price point to date for this cycle.

TradeTech's mid-term and longer-term price indicators remain unchanged at US$39/lb and US$50/lb respectively. Both are unchanged from December 31.

In Australia, major producer Paladin Energy ((PDN)) was yesterday forced to lower its production guidance for the current financial year. Most stockbroking analysts, it appears, are prepared to stick with a positive view on the basis of an anticipated rise in the price of uranium over the coming 12-18 months.

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