An Un-Happy New Year For Uranium

January was tough on uranium, with U3O8 prices dropping more than 5%, or US$2.25/lb to $42.25/lb from the prior month. The price is now at its lowest level since March 2009.

The fairly steady decline that has been seen over the past few months is primarily the function of supply and demand fundamentals, with a high availability of stock not being helped by increasingly low-priced supply and light, mostly discretionary demand.

There were fourteen transactions reported over the course of last month, which saw approximately 2.8m pounds of U3O8 equivalent changing hands. Industry consultant TradeTech reports that over half of the transactions involved utility buyers, with purchases remaining discretionary in nature.

The downward trend continued last week, with TradeTech's Spot Price Indicator giving up another $0.25 to $42.25/lb U3O8. Turnover was once again light, with only three transactions totalling approximately 850,000 pounds happening in the spot market. Buyers included utilities and intermediaries.

Prices did firm towards the end of the week, and apart from four US utilities looking for around 1m pounds of stock, TradeTech notes there is increasing anticipation of new demand from the market's new uranium fund, Uranium Investment Corp. The fund, which is currently trying to raise C$150m for investment in uranium products, is expected to close on February 9.

With this new player set to enter the market, many are hoping the spot price will finally reverse its declining trend. The good news is: at least one buyer last week was of the same opinion, with a sale concluded towards the end of last week coming in at a slightly higher price, albeit for a small amount.

On the other hand, with demand remaining discretionary in nature, buyers are only really moving to lock in lower prices. Unfortunately, this demand is being met by an ever increasing willingness on the part of some sellers to lower prices further in order to close sales.

Last week capped off another quiet month in the term uranium market, with no new demand or transactions reported. The long-term price thus stays put once again at US$60/lb. Exactly where it was at the end of December.

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