Commodities | Nov 11 2008
By Andrew Nelson
Uranium prices continued their fledgling recovery, rising for a second week on a cocktail of negative production news, increasing demand and the establishment of a new uranium fund. Industry consultant TradeTech reports that the spot price lifted US$2 to US$48 on six transactions in the uranium spot market over the week. All were concluded around the current spot price.
Uranium prices have fallen from a record US$138 a pound in June last year to $45 a pound just two weeks ago as investors sold out of the metal on concerns the credit crisis and ensuing global economic downturn would put a temporary halt to the construction of nuclear power plants. (Note: the other leading industry consultant Ux Consulting even lowered its own weekly spot price indicator to as low as US$44/lb).
There were a number of beneficial developments over the week, but the fundamental plus in the spot price’s favour was that demand exceeded supply for the first time in recent months. According to the latest sector update by TradeTech, demand reached 5 million pounds compared to the just 3.4 million pounds offered.
The demand picture was helped by the entry into the market of a non-US utility seeking 2 million pounds of uranium oxide for delivery before July 2009, TradeTech reports.
The lack of supply was compounded by several production issues at two of the world’s biggest suppliers, which brought about question of future supply constraints. Kazakhstan State-run Kazatomprom said last week it expects 2009 production will be approximately 14% lower than previously forecast. Meanwhile Cameco, the world’s biggest uranium producer, said it had seen a “modest increase in water inflow” at its McArthur River mine in Canada. Production wasn’t affected, the company said.
Lastly, Deutsche Bank announced last week it would set up an exchange-traded fund with the primary asset to be physical uranium. Bloomberg reports the DB-New York Nuclear Uranium Fund will look to raise US$100 million in an initial public offering, according to a November 7 filing with the US Securities and Exchange Commission.
All in all, TradeTech reasons that with spot supply no longer overwhelming demand, with concerns over future production mounting and news of new assumed demand coming from Deutsche Bank’s fund, it all adds up to the prospect of increasing and sustained upward pressure on prices. Maybe, just maybe, uranium’s price recovery has begun.
