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Uranium Price Rising On Reduced Supply

Commodities | Nov 26 2013

By Greg Peel

The US-Russian HEU agreement has now officially come to an end, which means no more Russian Cold War warheads being dismantled and their fuel being sold through the US. Once upon a time industry analysts looked ahead to 2013 as the year the spot uranium price might take off, so important was this supply source considered, but now that we have arrived, the story is much different.

Still, the end of HEU is apparently having some psychological effect on the market even if analysts no longer assume much significance. Despite the supply impact, uranium producers across the globe have begun deferring projects, shelving expansion plans and cutting back production in order to lift uranium prices to a level above breakeven for new supply. It’s a long way back.

Momentum from the previous two weeks carried into last week, industry consultant TradeTech reports, with seven transactions totalling 1mlbs of U3O8 equivalent being conducted and the spot price ticking up further over the course of the week. While buyers were primarily traders, some utility demand was also noted.

The rush to place material before year-end appears to have now eased, and TradeTech’s spot price indicator is up US40c to US$36.25/lb.

Five transactions are also reported in the term market this week, involving deliveries in a range from 2015-2020. TradeTech’s term price indicators are unchanged at US$37.25/lb (mid) and US$50.00/lb (long).

US investment bank Goldman Sachs has been an intermediary player in the uranium market since 2009, offering mostly term delivery deals while exploiting the bank’s access to cheap funding. But no more. Goldman has decided to exit uranium and is looking to sell its trading book which currently holds US$200m of inventory and 75 forward contracts with 17 counterparties requiring delivery over the next five years, TradeTech reports.

Goldman’s exit coincides with US regulatory changes which have seen investment banks exiting the warehousing and trade of physical commodities including base metals and oil.

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