Uranium Week: Buyers Scramble

In last week’s Uranium Week I noted:

“Clearly trade talks are again reaching a crescendo, so maybe November 14 will not be timely for other issues to be considered.”

The November 14 deadline for recommendations of President Trump’s nuclear Working Group came and went without a murmur last week, although it is believed the report has been delivered to the White House. The deadline followed a 90-day extension granted at the request of the Working Group, so now it’s up to the White House to find the time to give the recommendations a glance.

The White House might have other things on its mind right now, which may mean the uranium market again remains in limbo until all is revealed. However, clearly as the year winds to a close, buyers are not taking a risk.

Two weeks ago, seven transactions totalling 2.2mlbs U3O8 equivalent were reported in the uranium spot market by industry consultant TradeTech and the consultant’s weekly spot price indicator rose US50c to US$24.65/lb. Last week saw ten transactions totalling 1.2mlbs, and TradeTech’s indicator has risen another US60c to US$25.25/lb.

This sudden burst of activity has followed weeks in the doldrums of uncertainty. Yet uncertainty remains.

Producers Jump In

Producers were among the buyers scrambling for material last week, with utilities having led the charge the week before. The question was raised in last week’s report as to whether typical end-of-year buying had begun. Or is it buying to get in ahead of typical end-of-year buying? Or is there really not much difference between the two?

Producers are buying in the spot market because for many, including the likes of leading miner Cameco, uranium prices are currently below the cost of production, hence it is cheaper to satisfy term delivery obligations with material bought in.

With producers now joining utilities, who were also in there buying again last week, there is somewhat of a self-fulfilling risk when it comes to end-of-year buying.

It is quite possible the year ends without any response from the White House with regard the Working Group’s recommendations, and it is becoming increasingly possible the year will end without any US-China trade deal. Then the typical new year quiet period takes over.

For now though, it appears both utilities and producers are keen not to miss out in terms of satisfying inventory requirements and delivery contract obligations.

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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