Has Spot Uranium Turned?

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By Greg Peel

Having fallen as low as US$48.85/lb, two week's ago the spot uranium price managed to sneak back to US$50.50/lb according to industry consultant TradeTech's price indicator. It is the second time, post Fukushima, that uranium has found buying support below the US$50 mark, albeit the market remains thin.

It was still thin last week when traders and hedge funds again moved in to snap up one million pounds of U3O8 equivalent in eight transactions, thus pushing TradeTech's indicator up US$2.00 by the end of the week to US$52.50/lb.

Nothing much has changed on the nuclear energy front to encourage buying beyond any perceptions of US$50 being a legitimate floor price. Japan still has excess inventory now it has shut down many reactors, Europe in general is still reconsidering its nuclear energy policy post Fukushima and the US government is still considering using funds from the re-enrichment and sale of tailings stockpiles for the purpose of environmental clean-ups. However, there appears to be little change to China's intentions to continue building nuclear reactors a-pace, except perhaps for a bit of extra effort to be made on the safety front.

On the supply side, a decision is still yet to be made on the future of Energy Resources of Australia's ((ERA)) globally significant Ranger mine, Paladin Energy ((PDN)) continues to run into delay issues in its African expansion, BHP Billiton ((BHP)) is struggling with rising costs for its Olympic Dam expansion plans, Cameco's substantial Cigar Lake project is yet to return to full development, and swing producer Kazakhstan is in no hurry to increase production with prices at these levels and global nuclear sentiment uncertain.

Perhaps enough for the speculative side of the market to consider long positions a good bet.

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