article 3 months old

Uranium Week: Court Rules No Restarts

Commodities | May 27 2014

This story features RIO TINTO LIMITED. For more info SHARE ANALYSIS: RIO

By Greg Peel

Industry consultant TradeTech’s spot uranium price indicator wallowed at US$28.25/lb last week, unchanged from the week before. Low prices are drawing some increased buying interest into the market, TradeTech reports, but not enough to move the dial. Only four transactions were conducted in the spot market last week, totalling 400,000lbs of U3O8 equivalent. Intermediaries, as well as utilities, were on the buy-side.

Crucial to any reinvigoration of uranium prices, spot or term, is the restart of Japan’s nuclear reactors. Despite production cuts and abandonments across the globe, the end of the Russian HEU scheme and an increase to planned Chinese reactor construction, the global uranium market remains sufficiently supplied at present, right through to term contract requirements. The swing factor for global demand-supply is stockpiled Japanese uranium which hangs over the market as a dark cloud.

For several weeks the market had been able at least to look forward to the restart of the first two Japanese reactors – Kansai Electric Power Company’s Ohi units 3 and 4 – sometime later this year, following the Japanese regulator’s safety green light. The first two restarts would be the precursor to around ten more in the near term. But while the Japanese government’s desperate attempts to restart the entire economy after decades of deflation are being derailed by the country’s need to replace the 30% of electricity previously provided by nuclear generation with costly fossil fuel alternatives, 189 Japanese citizens of Tokyo and surrounds have argued they could be in danger from an accident at the plant. The District Court has agreed.

Kansai EPC will appeal the ruling, but presumably it’s a no brainer that danger would indeed result from a reactor accident. The point is to make the reactors accident-proof, which is what the new and onerous regulations introduced post-Fukushima are intended to achieve. Crossing the street can also be dangerous.

This is not good news for a global uranium industry in despair. Leading producer Cameco last week withdrew its application to the Canadian regulator to licence the company’s Millennium mining project in Saskatchewan, citing current market conditions. Cameco will no more than keep the project ticking until such time as the market signals new uranium projects are required.

Meanwhile, majority Rio Tinto-owned ((RIO)) Rossing Uranium has pre-empted a likely increase to layoffs at its Namibian operations as the miner hits lower grades in the current environment of reduced demand.

TradeTech’s term price indicators remain unchanged at US$33/lb (mid) and US$45/lb (long).
 

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.

Share on FacebookTweet about this on TwitterShare on LinkedIn

Click to view our Glossary of Financial Terms

CHARTS

RIO

For more info SHARE ANALYSIS: RIO - RIO TINTO LIMITED