June 27, 2010

URANIUM SPOT PRICE HOLDS AT $40.775/LB IN CONTINUED WEAK MARKET

The spot price of uranium remained at $40.75 a pound U3O8 in the past week, according to price publishers TradeTech and Ux Consulting. But there are growing signs that a number of large utilities in Asia and Europe are poised to enter the medium- and long-term markets for substantial quantities of uranium, several market sources said. That activity should result in a major move up in the medium- and long-term prices, said one analyst, adding that spot prices will likely follow suit.

But for now, the spot market seems to be caught up in the summer doldrums, TradeTech said late Friday. Buying interest is lackluster at best, and all demand is discretionary, the company added. UxC late Monday added that prices in several recent deals for delivery at the end of 2010 and in the first half of 2011 have reportedly contained prices higher than the current spot indicator. But a more bearish seller said he expects the spot price to remain weak for quite a few months.

He added that to attract buyers in today's market, one would have to make an offer much closer to $40/lb. UxCs broker average price was $40.76/lb on June 21, up slightly from the $40.71/lb BAP on June 14. The BAP is a daily calculated midpoint of the bids and offers reported by three brokers -- ICAP, Tullett Prebon, and MF Global, according to UxC. In the long-term market, TradeTech kept its price at $60/lb U3O8 at the end of May, while UxC kept its long-term price at $58/lb. Market analysts and price publishers often have slightly different definitions of spot and long-term deliveries, but spot-market deliveries typically occur within about three to four months (but can sometimes stretch out to 12 months); long-term deliveries are multi-year deliveries that start typically start 18-24 months in the future (but can sometimes start as soon as 13 months out). TradeTech's monthly mid-term price remained at $50/lb at the end of May. TradeTech defines this mid-term price as applying to deliveries that begin immediately beyond the 12-month spot delivery window and that occur within one to two years from that point either as stand-alone agreements or as part of a long-term contract.

In a report sent to clients last week, Washington-based consultant Energy Resources International said it expects the long- term uranium price to decline further this year and possibly into next year. ERI said that under its reference case for nuclear power growth (uranium requirements to rise from 171 million lb U3O8 per year as of 2010 to 265 million lb per year in 2030), the long-term base price for uranium is projected to remain at about $50/lb through 2015. That price would gradually rise to about $74/lb in 2025, the ERI report said.

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