Uranium Week: May Ends At 2005 Prices

This story features PALADIN ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: PDN

By Greg Peel

There was no change to industry consultant TradeTech’s weekly uranium spot price indicator last week after four transactions totalling 500,000lbs of U3O8 equivalent were conducted with neither side interested in paying up or selling down. TradeTech’s weekly price of US$28.25/lb also represents the month-end price, with May having seen a fall of US$1.85 from April to a level last seen in April 2005.

Over the past twelve months, the spot uranium price has fallen 30%.

The fall comes despite several shut downs and postponements to uranium mining projects, which were ongoing last week. Paladin Energy’s ((PDN)) Kayekeleera mine in Malawi officially went into care and maintenance last week while French uranium major AREVA announced the delay to production start-up at its Imouraren mine in Niger, pending improved pricing. Similar announcements have been made recently by Rio Tinto ((RIO)) and Cameco.

While the shutdowns and delays are testament to an industry in a downward spiral since the Fukushima accident brought reactor shutdowns in both Japan and Germany, uranium sellers have welcomed the moves as necessary for establishing any sort of fresh price support.

A total of 23 transactions totalling 3mlbs of U3O8 were conducted in the month of May, TradeTech reports. The “have to” demand for immediate delivery characterising much of the buying interest in the past has shifted to suppliers finding themselves in a “have to” sell position. Multiple sellers and limited sales opportunities continue to define the term markets as well, TradeTech notes, with both intermediaries and primary producers fighting aggressively for each new potential contract, particularly if that contract is mid to early long-term.

TradeTech reduced its mid-term price indicator to US$31.00/lb from US$33.00/lb last week while leaving its long-term indicator of US$45.00/lb unchanged. There is nevertheless good news to be found on the demand side of the longer term uranium equation.

While not impacting on uranium prices, there has been some concern in energy markets with regard potential sanctions against Russia in light of the Ukraine conflict. Russia is the net largest exporter of fossil fuels and also a significant player in the uranium market through the export of enriched fuel and the construction of nuclear reactors for foreign customers. So far the sanction story has remained one of apparent stand-off, while in the meantime Russia has pushed ahead with its reactor building contracts.

Russia and China have reportedly signed a contract for the former to assist the latter in building a floating nuclear power plant. The world’s first floating power plant is currently under construction in St Petersburg. Russia has also signed a general framework agreement to build units three and four at the Kudankulam plant in southern India, and signed a memorandum of understanding to build, supply and maintain a nuclear plant in Kazakhstan. It would be the first reactor built in Kazakhstan since the closure of the Aktau reactor in 1999.

Meanwhile, the Obama Administration’s new US energy policy, released last week, outlines an “All of the Above” strategy which recognises that no single energy source is sufficient to meet the energy challenges and goals of the world’s largest economy. The report highlights a commitment from the US Department of Energy to nuclear power and support for the commercialisation and deployment of new technologies for reactors both small and large. The news should be a relief for those in the uranium industry wondering if the US shale gas explosion may prove a death knell for nuclear energy in a country that has seen its own share of nuclear accidents.

On the other hand, aforementioned India may have signed up the Russians to build two new reactors but the newly elected Indian prime minister favours development of renewable energy sources for his burgeoning population, such as solar and wind, and thus may defer plans to install 20 gigawatts of nuclear capacity in India by 2020.

Yet possibly the best news of the week and beyond for uranium comes out of Japan. To date the Japanese Nuclear Regulatory Authority has frustrated the local nuclear power industry with its apparent reluctance to grant necessary safety approvals ahead of reactor restarts. But the five-year tenure of the two NRA chiefs will end in September and Prime Minister Abe has already chosen his two, more nuclear power disposed replacements. Abe has a track record of filling public service positions with the like-minded (See Bank of Japan governor) and it is hoped the process of restart approvals will be sped up after the changeover.

That said, restarts can still be challenged in Japan’s district courts, successfully, by local protesters, as was seen a week earlier when a court ruled in favour of blocking the first two pending restarts near Tokyo. An appeal is set to follow.

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.

Click to view our Glossary of Financial Terms