Commodities | Aug 05 2014
By Greg Peel
Just when it looked like the last person to leave the uranium spot market was about to turn off the lights, volumes suddenly surged last week, industry consultant TradeTech reports. Six transactions were completed totalling in excess of 1.5mlbs of U3O8 equivalent, representing the highest weekly volume since September last year. For the month of July, 19 transactions were completed totalling 3.1mlbs, some million pounds more than changed hands in June.
With prices at nine-year lows, it is no great surprise the uranium market is generating at least some interest. However, there appears no reason to pop the corks and call the beginning of the recovery just yet. Market uncertainty contributed to last month’s pick-up in volumes, TradeTech notes. Enrichment company ConverDyn’s legal challenge of US government inventories being sold onto the market is still proceeding, and while the latest round of US/EU sanctions against Russia made no specific mention of nuclear fuel, Russia’s status as the largest global exporter of enriched product has market participants a little nervous.
As it was, the pick-up in volumes last month was attributable mostly to supply-side participants – producers and intermediaries – than end-user utilities. While there are two utilities with tenders currently out for spot delivery totalling 750,000lbs, utility demand continues to be seen more in the mid and longer term markets. Six transactions totalling over 10mlbs U3O8 equivalent were reported in July for delivery from 2015 to 2025.
It seems strange that producers would be suddenly buying up uranium on spot given it is producers who are jumping aggressively on every term market tender that comes along, thus ensuring prices remain steady at low levels. Producers usually only buy in product at spot to make up for shortfalls on contractual obligations, but given low demand ever since Fukushima, and the closure of reactors in Japan and Germany, producers have been building up significant stockpiles which they are keen to offload to support cash flow. Are they trying to arbitrage the price curve?
TradeTech’s spot price indicator reached US$28.75 last week before settling back to US$28.50/lb by week’s end, unchanged from the previous week. The July 31 spot price of $28.50 was up US30c from the June 30 price. TradeTech’s term price indicators remain unchanged at US$31/lb (mid) and US$44/lb (long).
In other news, the Queensland state government has announced it is ready to accept mining applications having now ended the longstanding state ban on uranium mining. One might suggest the relatively new conservative government does not have a great sense of market timing. A previous Labor government banned uranium mining in 1989 when the long-running Mary Kathleen mine closed down, but the Beattie Labor government did attempt to negotiate a lifting of the ban last decade, only to be shot down by the powerful coal unions. Back then uranium prices were at their giddy heights.
While Queensland boasts several uranium mines-in-waiting and an estimated A$10bn of known reserves, it is hard to see the government being knocked down in an application rush given spot uranium is currently trading well below the calculated cost of new production, and mines elsewhere in Australia and the world are being shut down, delayed or shelved.
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