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Uranium Week: Price Jump

Weekly Reports | Jul 31 2018

The spot uranium price saw its biggest weekly rise year to date last week but given the reasons behind it, can it be sustained?

By Greg Peel

There is something rather Heller-esque about a 5% jump in the share price of Canadian uranium producer Cameco last week.

In delivering its June quarter results release Cameco announced that the previously temporary suspension of operations at its McArthur River mine and Key Lake mill will now be indefinite. While the miner is maintaining strong cash flows from selling off stockpiles and focusing on operating efficiencies, the uranium market remains in the doldrums, hence the announcement.

In Heller’s iconic novel, American alfalfa farmers are subsidised for not growing alfalfa. The more alfalfa they don’t grow, the greater the subsidy.

Not only did Cameco’s share price jump 5% on the announcement, the uranium spot price jumped US$1.50, or 6.2%, on the day. This is understandable – less supply implies higher prices – but given the supply constraint is all about low prices, it’s a circular argument.

Over the week, the spot uranium price rose US$2.10 or 8.8% to US$25.85/lb, to mark the biggest weekly jump in 2018 to date. The increase was nevertheless not about notably increased demand from end-users.

National Security

Utilities are currently holding off on purchases pending the outcome of the section 232 investigation in the US, and US utilities are preparing their submissions to the Department of Commerce now that a 45-day period for public comment has been announced.

It’s not hard to guess which side the utilities will be taking. They’re not surviving now, at historically low uranium prices, so forcing them to buy 25% of their uranium supply domestically, at higher prices, is not exactly going to help.

But that’s what US producers want, hence the investigation. The petitioning producers are citing “national security” as their incentive. Nothing to do with their own struggle to survive low uranium prices of course.

The Trump administration’s infamous trade tariffs have been imposed under the guise of section 232 – implying a matter of national security. It is thus not a surprise the DoC’s Bureau of Industry and Security last week stated it was “particularly interested” in comments and information related to national security.

The BIS specifically called for information on the quantity or circumstances related to uranium imports and US uranium production and production capacity needed to meet projected national defence requirements. National defence does not just mean bombs, but security of domestic electricity generation.

Which brings us back to nuclear power utilities. And that’s where it will really become a Catch-22.

A total of 1.3mlbs U3O8 equivalent changed hands in the global spot market last week, industry consultant TradeTech reports. TradeTech’s weekly spot price indicator has risen US$2.10 to US$25.85/lb.

TradeTech’s term market price indicators remain at US$26.50/lb (mid) and US$28.00/lb (long), pending end of month reappraisal.

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