Commodities | May 13 2014
By Greg Peel
It started out at US$50/lb – the post-Fukushima price it was assumed would prove a floor for the uranium spot price. Indeed the price did hold and bounce off 50 briefly, but it wasn’t long before 50 was breached and 40 became the new assumed level. Then in a world of oversupply, lack of buyer interest, the withdrawal of significant intermediaries and ongoing delays to Japanese reactor restarts, spot uranium breached 30 two weeks ago – the price considered to represent the average cost of production.
Industry consultant TradeTech’s spot price indicator was marked at US$35.40 on January 31 and every week since has seen an incremental slide until last week, when the indicator stalled at an unchanged US$29.00/lb. Volumes remained low last week at 600,000lbs of U3O8 equivalent over four transactions.
As TradeTech had speculated, the breach of the average cost barrier affected a psychological change in market attitude. Sellers who have been aggressive in recent weeks backed off and buyers who have been ambivalent for some time began to show interest, with two utilities entering the market each seeking below 500,000lbs and intermediaries looking for material on twelve-month delivery. One week of unchanged prices does not a summer make, but perhaps, this time, a “floor” really has been found.
We shall not yet tally our poultry.
Indeed, it appears the restart of Japan’s first two reactors will now be delayed. The nuclear industry was hoping for the first restarts to occur in time for peak power demand in the Japanese summer but the regulator has told Kyushu Electric Power that safety upgrades to the Sendai 1 and 2 plants are insufficient. While presumably the Sendai plants are now earthquake proof, they remain vulnerable, according to the regulator, to an airliner crashing into them, or some other such inferno-causing event.
Meanwhile, the US Energy Information Administration had good news and bad news for the nuclear industry last week. The good news is that an anticipated decline in coal’s share of power generation will impact positively on nuclear generation demand. The bad news is that while the EIA forecasts US electricity demand to increase 30% to 2040, nuclear’s share of generation is only forecast to increase to 20% from 19% by 2025. The bulk of the slack will be picked up by natural gas-fired generation, the growth of which is expected to outpace nuclear by eightfold.
TradeTech’s uranium term price indicators remained unchanged last week at US$33.00/lb (mid) and US$45.00/lb (long).
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