Uranium Week: Doldrums

It’s rather difficult to maintain interest in a market for which, week after week, the story remains the same. But unfortunately that is the case for uranium at present. Until there is a decision on section 232, buyers are unwilling to commit.

This was again the story last week. While 500,000lbs U3O8 did change hands in an off-market transaction, on-market prices continued their downward drift last week on low interest. Industry consultant TradeTech reports only three transactions. Sellers continue to lower prices in an attempt to flush out any buying interest.

TradeTech’s weekly spot price indicator has fallen another -US20c to US$24.50/lb.

The US Department of Commerce has submitted its (as yet confidential) recommendation with regard section 232 to the White House. A response from the president is due on July 14.

Or is it?

If the waiting game has not already worn down market participants, there may be more pain to come. July 14 is only an arbitrary deadline.

Section 232 covers the broad notion of “national security” and is that which President Trump invokes when implementing his trade tariffs. Two weeks ago Trump shocked a world expecting a US-China trade deal at any moment when he increased the tariff on US$200m of goods imported from China to 25% from 10% — a deadline that had been extended, and extended, and extended again as negotiations continued.

On the flipside, last week Trump announced a postponement of a decision on a tariff increase for imported European cars, and last night he ended tariffs on steel and aluminium for Canada and Mexico.

With regard the uranium market, the president is being asked to decide whether US nuclear power generators should be forced by law to buy 25% of their uranium requirements from US uranium producers, rather than a 25% tariff be imposed on cheaper uranium imports. But it is still a 232 decision, as is all of the above.

Thus while decisions on steel, aluminium and autos are unrelated to the uranium market, “developments in these investigations serve to illustrate the wide-ranging discretion afforded the US President by the supporting legislation,” notes TradeTech. “Recent developments in these investigations also demonstrate both the varied paths these negotiations may take, as well as the array of legal mechanisms available to the US President to impose, delay, or defer decisions regarding foreign imports”.

Conclusion? Don’t hold your breath for July 14. Meanwhile, buyers remain on the sidelines.

There were no transactions reported in uranium term markets last week. TradeTech’s term price indicators remain at US$28.50/lb (mid) and US$32.00/lb (long).

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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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