Uranium Week: Supply-Side Issues

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By Greg Peel

After a flurry of activity in the previous couple of weeks, volumes on the spot uranium market settled back last week, industry consultant TradeTech reports, as utilities proved reluctant to follow prices higher. Seven transactions totalling 700,000lbs of U3O8 equivalent were conducted – half the previous week’s volume – with traders making up the buy-side.

As traders and producers entered on the sell-side it appeared the uranium price would be forced lower last week but then news broke of supply disruptions and thus prices later in the week held up. TradeTech’s weekly spot price indicator is down a mere US5c to US$38.10/lb.

It appears the gods are not smiling on Australian uranium producers at present. Last week BHP Billiton ((BHP)) suffered an electrical failure at its Olympic Dam mine in South Australia, putting the Svedala processing mill out of operation for potentially six months. Deliveries will not be impacted but 2015 production will be reduced by 3-4mlbs.

And coincidently, Rio Tinto ((RIO)) suffered a fire at its Rossing recovery plant in Namibia and as investigations continue, it is yet unclear as to what extent production will be impacted.

There was potential good news for BHP nonetheless, with the announcement the South Australian government will conduct a royal commission into the possible development of a nuclear energy program in the state.

Australia’s nuclear history is one of ups and downs, but in the post Chernobyl era the then government restricted nuclear mining, strictly vetted export customers, and considered the prospect of nuclear power generation unpalatable for the electorate. Mining restriction has eased a little since, albeit some states still maintain bans, and while customers are still strictly vetted there remains no nuclear reactor in the country bar a small plant used to manufacture medical isotopes.

The argument as to whether Australia should look to nuclear power as part of an effort to reduce carbon emissions, and indeed as to whether nuclear power really does offset carbon, continues to rage in the post-Fukushima environment. The South Australian government would be the first to test the electorate, if such a decision is made. Currently the state relies on gas and coal-fired electricity generation with some supplement from renewable sources.

And Australia’s biggest uranium mine is in South Australia.

Coming back to Fukushima, there was news out last week the Japanese regulator has cleared Kansai Electric Power Co’s Takahama units 3 and 4 in the Fukui prefecture for restart. Kyushu Power’s Sendai 1 and 2 units have already been cleared for restart, perhaps by June, so the Takahama units are next off the blocks.

But as the long Sendai process indicated, safety clearance is one thing but political clearance is another. Neighbouring prefectures have already voiced their concerns with regard potential accidents, so the regulator may yet need to address these issues, as was the case for the Sendai plants, before any timetable for restart can even be contemplated.

TradeTech reports no transactions in the uranium terms markets last week. The consultant’s term price indicators are unchanged at US$41.25/lb (mid) and US$50.00/lb (long).

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