Commodities | Oct 02 2012
By Andrew Nelson
September started off as about the worst looking month we’ve seen in the uranium spot market in quite a while. It seemed the sluggish spot price was caught in a near perfect storm of indecision about the future of Japan’s nuclear program and merciless bargain hunting, with buyers poised to swoop on any sign of weakness. But as month end neared, there were a few rays of sunshine that peeked through the clouds.
In the early part of the month, the slower the sales, the more buyers emerged out of the woodwork and the more cash-poor sellers came to the table to get deals done. If there is anything positive to take from this, it’s at least there were new buyers entering the market.
As the month played out, spot prices fell at a fairly steady rate, at least over the first three weeks of September. By the end of the month, however, it seemed the retreat had slowed. The question that begs to be answered is: is this the floor? The answer isn’t as finite: wait and see.
There is one ongoing factor affecting the position of sellers that we don’t see given much play, and that is uranium deliveries to China have slowed considerably following the disruption of rail shipments between the Chinese and Kazakh border. This, in turn, has created some real cash flow problems for a number of suppliers, hence the keenness exhibited by some sellers to get deals, any deals, done.
The pace of discounting did slow towards the end of the month, bolstered by news Japan wasn’t actually as yet committed to plans to phase out all of its reactors in 30 years. In the end, the nation’s government was forced to bow to mounting pressure from the country’s largest business to keep the reactors running. With only two reactors having been restarted this year, it seems the decision means the rest will probably be coming on-line and soon.
More good news came when China said it would it would resume construction of new reactor builds towards the end of this year.
While the decline slowed, there was still a bit of a mixed response to these month-end developments. Some sellers continued to drop offer prices, which in turn brought in more buyers, but this time around quite a few of them were looking for significant quantities of material. Industry consultant TradeTech notes this latest run had buyers actually willing to pay higher prices for larger quantities, with quite a wide range of prices seen as the month drew to a close.
Of this new demand, there was one non-US utility looking for around 1.8m pounds of U3O8 in enriched uranium product for delivery before the end of the year.
Overall, TradeTech reports that September saw about 3.7 million pounds U3O8 equivalent change hands in 18 separate transactions. This compares to 17 transactions for 2.9m pounds in August. Over the course of September, TradeTech's U308 Exchange Value dropped US$1.50 from the August 31 exchange Value of US$48.00 to US$46.50 per pound.
There were nine transactions reported in the term uranium market in September, but the dynamic was much the same. By the end of the month, TradeTech’s Mid -Term U3O8 Price Indicator had fallen $US$1.50 to US$50.25. Again, demand did strengthen over the course of September, but the falling spot price continued to apply downward pressure on mid-term prices.
TradeTech’s Long-Term Price Indicator bucked the trend, rising US$1.00 to US$61.00 on a few recently concluded transactions.
As said earlier, the end of the month saw a week of mixed signals. The abrupt turnaround in Japan’s policy may have had a soothing effect, but it has fallen well short of being able to reassure the bulk of the market. As such, a few sellers continued to drop offer prices over the course of last week. The good news is, TradeTech reports further buying interest continued to emerge last week, drawn out by the recent drop in prices.
There were four transactions on the spot market last week, with over 1.1 million pounds U3O8 reported to have changed hands. TradeTech notes that a few of the smaller sales were below spot, but nearly 1 million pounds were also bought at or better than current prices.
The key take away from this, notes TradeTech, is that buyers seem willing to pay a little bit more for larger quantities. As always, market participants included utilities, producers, traders, and financials.
TradeTech’s Weekly U3O8 Spot Price Indicator finished last week unchanged at US$46.50/lb.
There were four transactions reported last week on the term uranium market and also some signs of new demand.
Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.
