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Uranium Week: Paying Up For Certainty

Weekly Reports | Jun 04 2019

Buyers are paying more for uranium that does not come from sources facing possible US restriction but falling demand is still sending prices lower.

-Uranium price discrepancy opens up
-Trend remains down
-IEA rails against premature reactor shutdowns

By Greg Peel

An interesting dynamic opened up in the month of May in uranium markets with regard the uncertainty surrounding the US president’s pending decision on section 232, which may force US utilities to buy at least 25% of their uranium supply from US producers. Presumably that uncertainty is exacerbated every time Donald Trump pulls a new tariff rabbit out of his hat, given tariffs are also a matter of “national security” under section 232.

A wide price discrepancy has opened up based on origin of material. Buyers are now willing to pay higher prices for deliveries specifically not from Russia, Kazakhstan or Uzbekistan, which are potential US trade restriction targets. Buyers who do not specify origin of material are enjoying “considerably” lower prices, industry consultant TradeTech reports.

Transactions involving delivery at Canada’s Cameco, which for many months commanded a premium over other delivery locations, showed little to no price premium over other locations in May but this has been attributed to the general decline in demand.

Uranium spot market transactions totalled just over 2.4mlbs U3O8 equivalent in May – the lowest monthly total since December 2017. A total of 20 transactions was also under the year to date monthly average, as it was in April.

TradeTech’s weekly spot price indicator closed the week, and the month, at US$24.00/lb, down -US30c for the week and -US$1.15 from end-April. The weekly price indicator is now -2% below the average price traded in 2018 of US$24.56/lb.

Only two transactions were concluded in uranium term markets in May, reflecting an even greater unwillingness to commit to term delivery contracts amidst 232 uncertainty. TradeTech’s monthly mid-term price indicator has fallen -US$1.15 to US$27.35/lb and the long-term price indicator has fallen -US$2.00 to US$30.00lb.

Fading Fleet

Only serving to weaken demand further is ongoing shutdowns of legacy US reactors in the face of cheaper gas-fired electricity production and subsidised renewable production. Last Friday Entergy's Pilgrim plant in Massachusetts closed its doors after 47 years of service.

The closure marks the eighth US nuclear plant to be closed prematurely since 2013 and 11 more are scheduled for closure between this year and 2025. Nuclear plants in some states have also failed to gain credit for producing zero-carbon electricity, as is afforded to renewable energy.

The shutdowns are alarming the International Energy Agency, which last week warned the world risks a “steep decline” in nuclear power in advanced economies which could result in billions of additional carbon emissions.

Nuclear power is currently the second-largest global source of low-carbon power, accounting for 10% of global electricity production. Hydro power accounts for 16%. Without policy changes, advanced economies could lose as much as -25% of their nuclear capacity by 2025, the IEA warns, and as much as two-thirds by 2040. The lack of further lifetime extensions of existing nuclear plants and new projects could result in an additional 4bn tonnes of CO2 emissions.

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