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Uranium Week: Uncertainty Supports Prices

Commodities | Sep 16 2014

By Greg Peel

Nuclear energy market participants gathered in London last week for the annual World Nuclear Association symposium. In the past the symposium has led to a week of little trade in markets, given everyone is elsewhere, yet five transactions totalling 500,000lbs of U3O8 equivalent were conducted last week.

Industry consultant TradeTech’s spot price indicator rose US75c by week’s end, to US$33.00/lb, for yet another weekly gain. Utilities and intermediaries made up the buy-side.

The symposium is also typically a forum for market participants to talk up the market between each other over complimentary refreshments, although recent years have witnessed an understandingly more sombre tone. Last week’s increase in uranium price is not a reflection of optimism but a reflection of uncertainty.

Concern continued during the week with regard Cameco’s labour dispute and subsequent lock-out of workers from its McArthur River mine and Key Lake Mill processing plant. As the single biggest producing mine in the world at present, McArthur represents a not insignificant supply swing factor were the dispute to continue. However late on Friday Cameco announced it had reached a tentative agreement with the unions, suggesting production could return to normal once a final agreement is reached.

A wider cloud nevertheless hangs over the market with respect sanctions against Russia. The nuclear industry has been nervous ever since the first round of sanctions were imposed due to Russia’s Ukrainian incursions, and nervousness has only grown as new rounds of stiffer sanctions have been announced. The latest round stepped up restrictions in the energy industry but as yet nuclear considerations have been absent. This has not stopped the industry being anxious about existing commitments with Russia, and there is now a reluctance to enter into any new contracts.

Meanwhile the Japanese regulator has now given safety clearance to Kyushu Electric Power’s Sendai units one and two. The Sendai units were originally given clearance until local residents expressed their concern about risks in the event of some major catastrophe, such as an earthquake, at which point the regulator went back to the drawing board to create even more stringent safety requirements.

Presumably Sendai is now safe come hell or high water, and the local mayor and governor are in favour of restart. This means restarts could occur early in 2015 but Kyushu Electric still has some paperwork to fill out and, more importantly, the residents still need to be convinced.

While the eventual restart of the first Japanese reactor should be a catalyst for increased uranium demand, recent price rises more reflect aforementioned uncertainty than they do the background global demand-supply equation. Thus were Cameco’s mine to return to normal and resolution to be reached in Ukraine, reversing sanctions, it is quite possible the spot uranium price will again fall before it can meaningfully rise.

There were no term transactions completed last week and TradeTech’s term price indicators remain unchanged at US$34.50/lb (mid) and US$44.00/lb (long).

We’ll end with the following graph, which provides a little bit of insight into future demand.

 

 

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