Commodities | Jul 29 2014
By Greg Peel
Several utilities have been monitoring market conditions for the past few months, reports industry consultant TradeTech, and are now expressing interest in potential purchases. This is hopefully good news for a wallowing uranium spot market that failed again to become excited last week, despite an increased possibility of the first Japanese reactor restarts being not far off.
Sellers did back off on their offer prices last week and only four transactions totalling less than 400,000lbs of U3O8 were reported, leading to a tick-up in TradeTech’s spot price indicator of US20c to US$28.50/lb.
One utility is seeking 500,000/lbs for September delivery, with offers due next month.
In the enriched uranium market, simmering tensions between the US and Russia with regard the Ukrainian conflict have led US utilities to look to securing alternative supply were Russian exports to be cut off or banned, TradeTech reports. Yet current supply remains more than sufficient to meet current demand, hence enriched prices remain under downward pressure.
Within the US, an ongoing battle has been playing out over past weeks between the Department of Energy and uranium enricher ConverDyn, as the company seeks an injunction against further sales into the market of DoE inventories. ConverDyn is arguing the sales are impacting its revenues and are indeed in breach of the law. A court hearing is scheduled for July 29.
No new transactions were reported in the term market but new demand emerged, TradeTech reports, with a utility seeking offers for 2.5mlbs U3O8 equivalent to be delivered over five years. Several other utilities are expected to enter the term market in the September quarter.
TradeTech’s term price indicators remain unchanged at US$31/lb (mid) and US$44/lb (long).
UBS has cut its FY15 (June-end) average spot price forecast to US$35/lb from US$46/lb and FY16 to US$48/lb from US$53/lb. JP Morgan has cut its 2014 (calendar) forecast by 22% to US$31/lb, its 2015 forecast by 40% to US$30/lb and its 2016 forecast by 33% to US$40/lb.
JP Morgan had previously assumed a shortage would eventuate in uranium supply and given the current spot price is less than half that required for new supply to be viable, the assumption still stands over the long term. But with the anticipated restart of the first Japanese reactors dragging on and on, the broker now expects an inventory overhang for some time. The broker had also assumed two reactors would be restarted in 2014 and up to 42 by 2019, but this now seems optimistic.
The broker cites industry analysis by Reuters which suggests only 14 of Japan's 54 reactors are definite candidates for restart, another 17 are uncertain, a further 17 will likely never meet safety requirements and all six Fukushima reactors will be decommissioned.
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