article 3 months old

Uranium Week: Two Year High

Weekly Reports | Sep 11 2018

Solid uranium spot market volume last week saw the spot price rise to a two-year high.

-Solid volumes support prices
-MIT weighs into nuclear debate
-Section 232 inefficient

By Greg Peel

Last week saw uranium market participants attending the annual World Nuclear Association Symposium in London.  Aside from the usual crowd representing producers, utilities and intermediaries, this year’s symposium attracted renewed interest from investors who had otherwise been absent in recent years.

Speculation in the uranium market has now shifted from spot market activity or futures trading – a contract which has never really gained traction – to pooled speculation via investment in a listed uranium fund, which buys material directly from producers.

Much interest was generated when the Yellow Cake fund was listed on the London Stock Exchange’s Alternative Investment Market in June. The AIM is arguably London’s Nasdaq equivalent. That fund has since punted on the uranium price by buying sizeable quantities directly from Kazakhstan’s state-owned producer, which itself is currently contemplating going public with an IPO.

Now everyone wants in on the act. Renewed interest in the market from speculators is one reason the uranium spot price has been on the move in recent months, but genuine demand from utilities and producers buying in to fulfill contracts (having suspended their own operations due to low prices) have more recently been driving forces.

Solid Volume

Typically the week of the annual symposium is one of limited activity in the uranium market given everyone’s in London and not at their desk, but industry consultant TradeTech reports last week saw 2.4mlbs of U3O8 equivalent changing hands in the spot market – a significant volume in any week.

This follows a month of August which marked the highest turnover for an August since 1995.

As noted in last week’s Uranium Week, producers have become increasingly more active as buyers in the spot market at the same rate they’ve become increasingly less active in actually producing their own uranium. Utilities are also now on the move.

TradeTech’s weekly spot price indicator rose US30c to US$26.70/lb last week – a two-year high.

Red Tape

Last week also saw the highly respected Massachusetts Institute of Technology release a study which suggests unless nuclear energy is "meaningfully incorporated" into the global mix of low-carbon energy technologies, the challenge of climate change will be much more difficult and costly to solve. The report discusses recommendations for nuclear plant construction, current and future reactor technologies, business models and policies, and reactor safety regulation and licensing.

Thank you MIT, but the US Department of Commerce is still trying to figure out whether it should cede to a request from US uranium producers to force US utilities to buy a minimum 25% of their uranium requirement from US producers, instead of cheaper imported material from the likes of Russia, on “national security” grounds.

US nuclear power companies are already struggling to remain commercial at import prices.

US producers could be waiting a while to find out. Any national security consideration would come under Section 232, which is the same Act cited when Trump originally placed tariffs on steel and aluminium. A DOC request for comment with regard the uranium market has to date received 400 responses, leading the DOC to extend the deadline. The Act allows for objections and requests for exemption and to date the steel/aluminium tariffs have prompted no less than 17,000 of the former and 38,000 of the latter.

Suffice to say the DOC is now moving to make the process more efficient. Not sure how, as while the original rule did not allow for rebuttals once objections had been submitted, the new process also allows for "surrebuttals," which DOC said will mitigate concerns presented in various submissions.

Me neither, so I looked it up. It’s a rebuttal of a rebuttal.

There were no transactions reported in uranium term markets last week but utilities are currently evaluation delivery tenders. TradeTech’s term uranium price indicators remain at US$29.50/lb (mid) and US$31.00/lb (long).

Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)" – Warning this story contains unashamedly positive feedback on the service provided.

Share on FacebookTweet about this on TwitterShare on LinkedIn

Click to view our Glossary of Financial Terms