Uranium Week: Utilities Return

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By Greg Peel

Australian investment bank Macquarie Group ((MQG)) has revealed a further expansion of its energy trading book through the acquisition of Deutsche Bank’s uranium business. The deal was actually completed a couple of months ago for an undisclosed amount, although industry consultant TradeTech notes Deutsche’s long-term trading contracts and stockpiles of uranium concentrate were valued at around US$200m at year-end 2013.

Deutsche announced last December it was exiting commodities trading – a response to tighter US Federal Reserve rules regarding bank trading and warehousing of physical commodities. The departures of both Deutsche and Goldman Sachs as market intermediaries early this year left a large hole in the market and led to greater price volatility, given the lack of traders prepared to offer two-way pricing spreads for size. The exit has been offered as one of the contributing factors in the slide in the uranium price in the first half of 2014.

That an Australian investment bank should take over the reins as a global uranium intermediary makes logical sense given the fact Macquarie boasts an extensive global presence and Australia is a leading producer of uranium. That said, this month’s September quarter production reports revealed BHP Billiton ((BHP)) produced 11% less uranium than in the same quarter last year at its Olympic Dam mine in South Australia while Rio Tinto ((RIO)) slowed its Rossing production in Namibia by 35%, offset by the restart of processing at two-thirds owned Energy Resources of Australia’s ((ERA)) Ranger mine in the Northern Territory, which had been closed in December last year due to a leach tank failure.

News from last week’s annual International Uranium Fuel Seminar in Atlanta is that Japanese local municipalities are expected to vote on the restarts of Kyushu Power’s Sendai one and two reactors in December and if approved, restarts should occur by April.

We won’t hold our breath.

The spot uranium price continued its rally last week after stalling the week before, TradeTech reports. A total of five transactions were concluded representing around 500,000lbs of U3O8 equivalent. Utilities had emerged to helped turn uranium prices around a couple of months ago but they quickly retreated to the sidelines when the intermediaries and speculators moved in to send prices rising in leaps and bounds. It was worth a try, but having previously been desperate to offload material at any price, the sell-side, including producers and intermediaries, have now mostly cleared the decks.

Sensing they were not going to thus see a pullback in the rebound, utilities returned to the market last week to provide further upside influence. TradeTech’s spot price indicator finished the week up US50c to US$36.00/lb.

TradeTech’s term price indicators remain unchanged at US$37.75/lb (mid) and US$45.00/lb (long).
 

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