Uranium Week: Chain Reaction

Off-market utility demand emerged early last week, industry consultant TradeTech reports, forcing a rise in spot uranium prices. But once sellers were notified they had missed out on securing sales, they responded by reducing offer prices into a bit of a hole.

By week’s end, 1.2mlbs U3O8 equivalent had changed hands, with producers continuing to join utilities and traders on the buy-side as well as joining traders on the sell-side. TradeTech’s weekly spot price indicator closed the week down -US30c at US$26.80/lb.

The consultant has noted, throughout the year to date, prices nevertheless vary depending on delivery point, being either the US or Canada.

TradeTech’s term market prices remain at US$30.00/lb (mid) and US$32.00/lb (long).

Dwindling Demand

Producers and financial investors continue to drive the general upward trend in uranium prices and utilities do seem to be waking out of their long slumber now prices are much higher than they were a couple of years ago. But outside of China, and to a lesser extent other emerging markets, the demand side of the uranium equation continues to dwindle.

As the section 232 investigation in the US lumbers on at a snail’s pace, becoming ever more legislatively complicated by the week, America’s largest nuclear power producer, Exelon, has announced it is considering closing three of its reactors in Illinois.

The three reactors “are showing increased signs of economic distress,” Exelon explained, “which could lead to an early retirement, in a market that does not currently compensate them for their unique contribution to grid resiliency and their ability to produce large amounts of energy without carbon and air pollution”.

Exelon will “continue to work with stakeholders on state policy solutions, while also advocating for broader market reforms at the regional and federal level”.

Meanwhile, Japan’s Kyushu Electric Power Co made what was an apparently difficult decision last week to decommission its Genkai unit 2 reactor given the investment required to bring the near 40-year old plant up to meet post-Fukushima safety standards.

Genkai unit 2 will be the eleventh Japanese reactor to shut down due to similar economic decisions. On the other side of the equation, only eight Japanese reactors have satisfied new safety requirements and overcome popular resistance to restart operation since the 2011 disaster.

On the other side of the world, Spain expects to shut down all seven of its nuclear plants between 2025 and 2035 in line with the new socialist government’s plan to generate all of the country’s power from renewable sources by 2050. Nuclear currently accounts for 20% of Spain’s electricity generation.

If you are reading this article in Australia you’d be forgiven for thinking such a goal is quixotic, pie in the sky stuff, as our politicians would have us believe. Yet Spain already generates 40% of its power through renewables.

Greg Peel

About Greg Peel

Greg Peel joined Macquarie Bank in 1986 and acquired trading experience in equities, currency, fixed income and commodities derivatives, ultimately being appointed director of equity derivatives trading. He later published In With The Smart Money (a plain English guide to the mysterious world of financial markets and derivatives) and acted as a consultant to boutique investment funds. In 2004 Greg joined FNArena as a contributing writer. He is now a director and principal of the company. Greg compliments the journalistic background of the FNArena team with lengthy experience as a financial markets proprietary trader.

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