Commodities | Jul 02 2013
– Spot price down US20c on last week
– Down US85c in June
– Life emerging in term market
– TD securities cuts price forecasts
By Andrew Nelson
June was another difficult month on the uranium spot market, with spot prices falling and staying below US$40/lb. The last time the market saw sub-US$40 levels was back in March 2006, with the mark serving a key psychological barrier for some seven years now. That is until last month.
There has been a trickle of new demand emerging, but for the most part it is not only price sensitive, but also longer dated in nature. While longer dated supply can soak up stock and have a positive influence on spot prices, this hasn’t started to happen yet and the current US$39.55 spot price confirms this.
Last month sellers did their best to resist dropping prices, waiting for that day when demand starts to pick back up again. There was a carrot for sellers last month as well, with increasing talk the Japanese will beginning restarting reactors sometime soon. But the interim has seen cash-strapped suppliers grudgingly accept lower prices again, which has exerted more downward pressure on the spot price.
Twenty deals were concluded on the spot market in June and a little more than 2.5m pounds of uranium found a new home. TradeTech reports that year to date 19.9m pounds of U3O8 has been sold, which is distinct improvement over the 14.5m pounds for the same period last year.
Prices and transaction sizes tracked steadily lower as the month of June played out, with TradeTech noting sellers were reluctant to commit to higher volumes at currently depressed prices. Over the month, the spot price slipped another US$0.85/lb to the abovementioned US$39.55 as of last Friday.
Last week saw a total of six transactions involving approximately 425,000 pounds on the spot market. Utilities were the main buyers, while producers and traders acted as sellers. TradeTech notes there are still a number of utilities expressing interest, but only at even lower prices. Of last month’s US$0.85 decline, US$0.20 of it was booked last week.
There were some signs of life on the term market last month, TradeTech reporting six transactions were concluded involving mid to long-term deliveries. There was also new demand reported, with a utility and a non- utility looking for over 1m pounds for delivery out to 2014. TradeTech notes there are also a number of US and non-US utilities considering term market purchases, with entry expected over the coming months.
Yet despite the lift in demand, the current state of the spot market is also holding sway over term purchases, with the competition among sellers to stitch up some mid-term business running hot. This saw TradeTech’s s Mid-Term U3O8 Price Indicator slip US$1.00 to US$43.00/lb, although the price remained unchanged over the course of last week. The Long-Term Price Indicator held firm at US$57.00/lb, unchanged from last month and last week.
Canadian broker TD Securities adjusted its forecasts last week, to bring them a little closer to current spot, mid-term and long-term price levels. The broker now has US$41.30/lb for its forecast spot price, US$48.00/lb for 2014 and US$55.00/lb for 2015.
The broker’s long-term price assumption stays put at US$70/lb, TD continuing to expect that prices will eventually start to trend higher, at least enough so to allow producers to develop new primary sources of supply. The timing of this will be crucial going forward, as uranium miners have continued to suspend new projects over the past couple of years as the uranium price has declined.
TD Securities points out Cameco's Kintyre project is an excellent case in point. The company has confirmed the project needs a price of US$67/lb just to keep the doors open and product shipping.
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