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Uranium Week: The Power Of 232

Weekly Reports | Mar 06 2018

Uncertainty continues in the uranium industry as the US president exercises section 232 with regard steel and aluminium.

-Uncertainty grips US market
-Utilities mostly absent in February
-Deliver point disparity evident in March

By Greg Peel

For the uranium industry, February was a month of ongoing uncertainty. Aside from trying to assess, still, what impact will be felt from big production cutbacks announced last year by the likes of Kazakhstan and Cameco, the market continues to dwell upon what the outcome of the US section 232 petition filed earlier this year will be.

Note that pending US tariffs of 25% on steel imports and 10% on aluminium imports, announced by President Trump last week but yet to be confirmed, are an example of section 232 at work – the protection of domestic industry for security purposes.

While one might be drawing a long bow to connect steel and aluminium imports with national security, one might agree that a country’s energy security is indeed a matter of “national security” hence in the case of uranium, import tariffs can be justified. Except that the resultant increase in uranium prices would force the closure of US nuclear plants already rendered uneconomic by cheap natural gas.

Which would undermine energy security. Which way Trump swings in this one is anyone’s guess. And it may take some time to find out.

In the meantime, utilities are mostly absent from the uranium spot market, given the uncertainty. There was some utility activity on the buy-side over the month of February, but most material was acquired by traders and intermediaries, with traders and producers on the sell-side.

Industry consultant TradeTech reports 23 transactions were concluded in the spot market in February totalling 3.2mlbs U3O8, which was up from a very quiet January. TradeTech’s spot price indicator ended the month at US$21.50/lb, down -US25c from end-January.

Term markets also saw 3.2mlbs change hands, through ten transactions, with intermediaries and traders again the main buyers. TradeTech’s mid-term price indicator has fallen -US25c to US$25.75/lb and the long-term indicator has fallen -US1.00 to US$29.00/lb.

Geographic Disparity

While the month of February ended on a weak note, the beginning of March saw a notable rebound. TradeTech reports five transactions were concluded in the spot market over the week ending Friday, totalling 500,000lbs U3O8 equivalent. TradeTech’s weekly spot price indicator rose US30c over the week to US$22.25/lb, bearing in mind the price dipped to US$21.50/lb mid-week.

The lift in price was not so much a factor of demand/supply but of delivery location, TradeTech notes. Material at the European market’s delivery point in France is limited compared to that available at the North American market’s delivery point in the US. Buyers in Europe are therefore being forced to pay higher prices, and this is dragging up prices in a relatively quiet US market.

The market is not totally devoid of utility buying interest – there are several near-term delivery transactions currently under negotiation, TradeTech reports, but these were not concluded by week’s end.

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