Uranium Market To Remain Subdued

By Greg Peel

Uranium sector consultant TradeTech has left its weekly uranium spot price indicator at US$41.25/lb following last week's transactions.

The focus of the week's activity was a 600,000lb sale on behalf of the US Department of Energy while three further transactions totalled 300,000lbs. The fact that the DOE's agent was willing to accept lots of small bids, rather than one big one, had traders, producers and utilities all lining up, TradeTech notes.

With the big DOE order out of the way, sellers are hoping to be able to back off and allow unsuccessful bidders to push up prices, the consultant suggests, but the fact remains there is plentiful supply – hence no change to the weekly spot price indicator.

Indeed, it is the opinion of analysts at MF Global that the uranium price will be range-bound for the rest of 2010. The problem lies in the timing difference between nuclear plant commissioning and start-up.

The DOE expects China to increase its nuclear output by 9% each year to 2030 and notes it has a number of nuclear plants now on the drawing board. But as MFG points out, irrespective of the number of plants planned across the globe, the fact remains nuclear plants take several years of planning and construction before they are finally fired up. When they are fired up, they will indeed need substantial amounts of uranium feedstock to bring the reaction to its equilibrium level, after which a plant's ongoing fuel requirement drops right off.

There is a lot of uranium being mined across the globe at present to meet this expected surge in demand, but it is only going into stockpiles at present until called upon. Kazakhstan, for example, increased its uranium production by 30 million pounds over 2009 while global demand only increased 8 million pounds over the same period.

It is for that reason MF Global can see little change to current uranium spot prices while there is clearly no need for utilities to rush into buying.

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