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Uranium Week: Sellers Becoming Urgent

Weekly Reports | Mar 26 2019

The spot uranium price continues to slide as sellers are met with stalled demand.

-U3O8 spot price continues to fall
-Honeymoon may not be over
-Upheaval in Kazakhstan

By Greg Peel

The US Department of Commerce is due to submit its section 232 recommendations to the president on April 14. The president then has months to consider a response. All things being equal, it appears utility demand in the uranium market could remain stalled for some time.

Sellers became more aggressive in their offers last week as the spot uranium price continues to pull back from a near unbroken run up from late 2017 depths. They did manage to provoke some buying, but only after offers dropped to below US$26.50/lb, industry consultant TradeTech reports.

Seven transactions were concluded in the week totalling 700,000lbs U3O8 equivalent but by week’s end TradeTech’s spot price indicator had fallen a full -US$1.00 to US$26.00/lb, following on from the prior week’s -US$1.10 fall. The spot price has fallen -10% in 2019 but remains 20% higher year on year.

TradeTech’s term price indicators are steady at US$30.00/lb (mid) and US$32.00/lb (long).

Supply Side

The Honeymoon uranium mine in South Australia commenced production in 2011 and became the fourth of four Australian mines permitted under federal government restrictions. The other three are Olympic Dam in South Australia, owned by BHP Group ((BHP)), Ranger in the Northern Territory, owned by Energy Resources of Australia ((ERA)), which is two-thirds owned by Rio Tinto ((RIO)), and Beverley in South Australia, which is privately owned by US interests.

Currently Ranger is not mining any new ore, and Honeymoon was placed into care & maintenance in 2014 due to low uranium prices. But new owner Boss Resources ((BOE)) has begun a three-phase assessment as to whether restarting the mine is viable, or whether Honeymoon is over. Phase one has commenced, with phase three expected to be reached in 2020.

On the other side of the world, the president of Kazakhstan, Nursultan Nazarbayev, surprised by announcing his resignation last week despite his current term not ending until 2020. The 78 year-old, who has reigned since Kazakhstan became an independent state post the fall of the Soviet Union, has decided it’s time for some new blood.

While Nazarbayev has handed over the reins to a “loyal ally” to see out the term, the resignation has provided uncertainty in uranium markets as Kazakhstan is the global “swing” producer. State-owned Kazatomprom has for the past two years set production limits in order to prop up uranium prices, much in the same vein as OPEC/Russia in oil markets. The market will be hoping a new president is similarly inclined.

Demand Side

The US Department of Energy last week finalized up to US$3.7bn in loan guarantees to finance construction of units 3 and 4 of the Vogtle nuclear generation project in Georgia, completion of which is now years behind schedule. The Vogtle units were the first new plants to be licensed in the US in thirty years.

The Vogtle project is critically important to supporting the Administration's direction to revitalize and expand the US nuclear industry,” said Energy Secretary Rick Perry during a visit to the site. “A strong nuclear industry supports a reliable and resilient grid, and strengthens our energy and national security”.

We are reminded that the section 232 investigation centres around forcing US nuclear power generators to purchase a portion of their uranium requirements from (more expensive) US production as a matter of “national security”.

Over in Spain, the government has agreed to consider a conditional extension of the operating lives of the Almaraz plant units 1 and 2 until 2027-28. The country’s oldest nuclear plants were to be the first to close down under the government’s nuclear phase-out policy that would see seven rectors shut by 2035. Nuclear currently supplies 20% of Spain’s electricity.

Spain nevertheless holds a general election next month.

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