Commodities | Jun 04 2007
By Rudi Filapek-Vandyck
Our sources in the industry were quick in notifying us TradeTech’s weekly U3O8 (uranium concentrate or yellow cake) spot price had been set at US$138/oz on Friday, an increase of US$16 (13.11%) from the previous week’s US$122/oz.
No doubt the market will be closely watching what figure Ux Consulting, the other market watcher that sets weekly spot prices, comes up with this week as TradeTech’s figure appears only to include indicative suggestions regarding Friday’s auction.
On Thursday, Mestena’s monthly auction of 100,000 pounds of yellowcake had pushed the new benchmark up to US$133/oz. It is widely believed Friday’s auction will have generated a figure closer to if not above US$140/oz.
Possibly of equal importance is that TradeTech decided to increase its long term price indicator to US$95/oz on Friday as professional investors had been zooming in on the fact that, while the weekly spot price continued rising, the longer term price indicators at TradeTech and Ux had failed to follow suit. This may now take away some of the cautiousness that had been ruling the sector over the past few weeks.
As the next auction is scheduled for June 12 the market is likely to continue enjoying a strong pricing environment this month. Were spot uranium to reach US$150/oz over the next few weeks this would beat the most optimistic forecasts at the beginning of calendar 2007 by about six months. This may serve as a formal indicator about how the tightness in the uranium market has surprised even the staunchest bulls over the past few months.
Stockinterview.com reports the June 12 auction involves 125,000 pounds of U3O8.
What should boost enthusiasm among investors in Australia is that one of the not so bullish market watchers, Macquarie, has significantly increased its price forecasts for the next few years. Judging by the latest developments, however, another upgrade of the broker’s price forecasts may be necessary before the end of this year.
Macquarie forecasts U3O8 spot prices will peak at US$150/lb by year end, to average US$125/lb for the year. The average price for U3O8 is currently already above US$120/lb.
On Macquarie’s forecasts, spot uranium should average US$135/lb in 2008. The broker continues to see a “moderating on strong mine supply growth” after that with spot uranium expected to average US$100/lb in 2009.
“While these forecasts represent a central case, we would not be surprised to see prices move up to around US$200/lb over the next two years”, the analysts added.
