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Uranium Week: The Cost Of Clean-Up

Weekly Reports | Mar 27 2018

The Trump administration has suspended government sales of uranium in FY18, previously undertaken to fund an environmental clean-up.

-DoE suspends US government uranium sales
-Global price gap begins to close
-Japan restarts number seven

By Greg Peel

The US Department of Energy announced last week it would suspend government sales of uranium from excess inventories, which had previously been undertaken on a gradual basis in order to fund the environmental clean-up of the department’s Portsmouth enrichment facility in Ohio.

The suspension will last until the end of the government’s fiscal year (September) but energy secretary Rick Perry hinted that a more permanent suspension would be preferable, leaving the clean-up to be funded through the usual budget means. The initial suspension will remove some 1.6mlbs U3O8 equivalent from the market.

This will bring the total of all uranium supply removed from the market recently to 30mlbs, through policy decisions and producer supply cuts.

The spot uranium market initially sparked up on the news last week until it was learned the president was hesitating in signing the bill. Trump did ultimately sign the bill on Friday but it was too late for market participants to respond.

This suggests there may be a brighter week ahead, given industry consultant TradeTech’s weekly spot price indicator shed -US20c by week’s end to US$21.65/lb. Seven transactions were concluded totalling 900,000lbs U3O8 equivalent.

Mind the Gap

The spot price indicator may have fallen but last week finally saw some buyers taking advantage of the price gap that had opened up in past weeks between prices for delivery in the US and Europe. Greater demand for material in Europe had sent the spot price for delivery in France above that of delivery in the US.

That gap began to close last week as more interest was shown in US material, likely reflecting the fact once the price difference exceeds the relevant cost of delivery, an arbitrage opportunity opens up for intermediaries.

Quick Succession

After a seven year period of relative stasis, in which only five of Japan’s previous forty-odd nuclear reactors had passed regulatory safety inspections and received approval at all government levels to be able to restart operation, suddenly things are moving quickly.

Two weeks ago saw the restart of a sixth reactor and last week saw the restart of a seventh – Kyushu Electric’s Genkai unit 3.

Furthermore, a Japanese district court rejected a lawsuit to halt construction of the new Ohma nuclear plant, which had been delayed post-Fukushima and is now expected to be completed by 2024-25.

And the Genkai town assembly has sent a proposal to the government to support the government’s Strategic Energy Plan in favour of the construction of new plants.

There were no transactions recorded in uranium term markets last week. TradeTech’s term price indicators remain at US$25.75/lb (mid) and US$29.00/lb (long).

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