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Uranium Week: Sellers Jump On The Chance

Commodities | Sep 30 2014

By Greg Peel

The dam broke on pent up short term uranium demand the week before last, following escalating anxiousness with regard various exogenous factors including the legal challenge to US government uranium sales, the potential for increased sanctions against Russia, the strike in Canada, and the looming potential for the first Japanese reactor restarts. Having grafted its way incrementally off the July low, the spot uranium price suddenly jumped 10% on a wave of transactions.

The action clearly caught the attention of a few half-asleep sellers, who last week jumped on the opportunity of improved pricing to offload material. Industry consultant TradeTech reports transactions totalling 600,000lbs of U3O8 equivalent, compared to 1.8mlbs the week before. TradeTech’s spot price indicator fell US90c to US$35.60/lb, but market participants agree momentum remains to the upside, with utilities, intermediaries and speculators all in on the buy-side last week.

In news last week, China’s National Development & Reform Commission announced it planned to start four 1000MW nuclear plant projects in coastal areas. Britain finalised terms with Brussels to secure approval for billions of pounds of public funding for the new nuclear power plant at Hinkley Point.

Meanwhile, as the uranium market trembles with regard the possibility of increased Russian sanctions, South Africa has signed up Rosatom, Russia’s state-owned nuclear entity, to build reactors in the country. China has offered to build two new reactors in Romania and Saudi Arabia, of all places, has decided to invest funds in the development of both solar and nuclear power alternatives in the kingdom over the next 20 years.

The 2014 World Resources Production & Demand “Red Book”, released last week, noted 437 reactors were in operation globally in 2013, consuming 154mlbls of U3O8 equivalent, down 4% from 2012. World power generation capacity is estimated last year as 372GW.

The Red Book provides estimates for electricity demand in 2035, which from 2013 are 400-678GW on a low case-high case spread. These numbers are down 26% on the low case and 9% on the high case from last estimated in 2011. However despite excess global inventory generated by the Japanese reactor shutdowns, the numbers imply uranium demand will grow to 2035 to meet these estimates.

CIMB notes that were sanctions against Russia to extend to nuclear fuels, around 11% of global seaborne uranium supply would be removed. The broker expects the spot price to remains steady around the current level through the December quarter but to improve over the following 12-18 months on a fundamental basis.

TradeTech’s uranium term price indicators remain unchanged last week at US$34.50/lb (mid) and US$44.00/lb (long).

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