Commodities | May 12 2009
By Greg Peel
Uranium has experienced a couple of false dawns since the commodity price correction, having already significantly corrected long before oil led the others down in the 2008 collapse. Just when the market thought uranium couldn’t go any lower, it did, trading down to US$40/lb before rebounding more recently to US$45/lb. But last week saw a surge in activity, sending spot U3O8 up a solid US$4 to US$49/lb.
Industry consultant TradeTech noted “robust” buying interest, representing 2.5m pounds of U3O8 equivalent in eleven reported transactions, bringing the 2009 total to 10.5m pounds. Utility buyers accounted for half the transactions and purchased around 1m pounds, while the balance of the buying came from “financial entities”.
Uranium players from way back might recall how it was “financial entities”, ie hedge funds, which pushed spot yellowcake to its dizzy heights in 2007 on the back of the great nuclear energy race, or at least a perception of it. It all came to grief when the real market participants tired of these upstart pretenders and simply stopped buying. But base metals and other commodities found themselves in a trough in late 2008 and have staged significant rallies ever since, based mostly on the “reflation” trade and excitement over Chinese stimulus spending and metal restocking. As for actual demand, well, that’s another thing.
Uranium has been left behind, so it’s not hugely surprising that “financial entities” should feel safe to go back in the water. TradeTech suggests the re-entry of the speculators provides a “strong signal” that the spot uranium price has bottomed. TradeTech knows its stuff, but we have seen a couple of nice “bottoms” before. If the general commodities rally proves a bit of premature over-enthusiasm one wonders just how resolute the speculators will remain. But then “spot” uranium trading is no futures market, as can be seen by the low number of transactions, and uranium has definitely been a laggard of late.
TradeTech’s long term price indicator has remained unchanged at US$69 per pound.
