June 04, 2008 Spot market : buyers are back Publisher: U3O8.biz Author: Luke Brocki
-------------------------------------------------- The bull is back in the spot uranium market, as seen in stabilizing prices and optimistic research reports for the metal in the June quarter. Price publisher Tradetech left its spot uranium price unchanged at $60 a pound U3O8, amid reports of increasing buying interest through the month of May. According to Tradetech, spot market volume surged above 2 million pounds U3O8 equivalent last month, with 12 transactions reported.
The reason? Buyers are back, including producers, traders, investors, and utilities. Tradetech says prices in May's transactions varied slightly, but were mostly concluded at today's price. Many market participants feel the spot uranium price is now oversold, which would explain their return to the market.
Still, others remain bearish and wait for confirmation the metal's spot price has now stabilized. The less brave ones may have to wait for some time. After all, the spot market is hardly immune to fluctuations. Rival price publisher Ux Consulting dropped its price Monday by $1 to $59 a pound U3O8, but given the context of bullish fundamentals, that's unlikely to spawn another spot slide.
As the end of another quarter approaches, so do industry reports from market watchers. The latest, an equity research report on more than 500 global uranium companies, comes from Resource Capital Research (RCR), an equity research company focusing on small and mid size resource companies. According to the report, forward indicators show an expectation for an upward correction to the uranium price to around US$75 a pound U3O8, a 25 per cent jump from current price levels (click here to access the free summary report).
The report identifies uranium fund sentiment and activity as important factors in the outlook for the spot uranium price, given their combined holdings of around 20 million pounds U3O8 equivalent. The positive sentiment now back in the market is also fuelled in part by a strong increase in planned and proposed new nuclear power reactors worldwide. According to the RCR report, global reactors increased to 311 from 222 from January 2007 to May 2008, a 40 per cent jump.
Also according to the report, the positive one-month performance for many uranium companies reflects a bounce from an oversold position during last year's sub-prime crisis and renewed confidence in the uranium spot market. Indeed, the share price of many uranium juniors has moved up strongly from recent 12 month lows, in some cases rising more than 100 per cent, culminating in May's junior stock rally.
The majors are also doing well. In the past month Cameco is up 10 per cent, Denison Mines is up 21 per cent, Energy Resources of Australia is up 15 per cent, and Paladin is up 45 per cent. The only major in the red in the last month is Uranium One, down three per cent on news of continued production troubles.
World Nuclear News reported Tuesday that current economic uranium resources will last for more than 100 years at current consumption rates. When coupled with new discoveries, reprocessing, and recycling, projections of reserves have uranium supplies lasting for thousands of years.
Around 5.5 million tonnes of uranium that could be economically mined has been identified around the world. That figure is up 17 per cent compared to that from the last edition of Uranium 2007: Resources, Production and Demand---a report colloquially known as the Red Book and co-published every two years by the Organisation for Economic Co-operation and Development Nuclear Energy Agency and the International Atomic Energy Agency.
And, according to the report, there's plenty more where that came from, with expected uranium discoveries based on the geologic characteristics of known resources jumping 500,000 tonnes to 10.5 million tonnes.
The report sees nuclear power expanding from 372 GWe today to 509-663 GWe by 2030. Growth of such proportions would cause an increase in uranium demand from 66,500 tonnes per year to between 94,000 and 122,000 tonnes, and recent figures show currently identified resources are sufficient to meet the new demand. It's difficult to say how this data will affect uranium supply and demand curves in the short term, but it eases the minds of investors worried about the depletion of global uranium reserves.
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