Rumor Mill Hits Uranium

Nine MSN Finance

The last two weeks have seen carnage in spot commodity markets, yet uranium's trajectory has been to the upside. Despite small spot market transactions, uranium remains very much a term-contract commodity.

In the meantime, there's been some positive news in terms of uranium price upside. China has largely reinforced its commitment to its long term nuclear energy expansion plans and more recently Japan has indicated that it won't be abandoning nuclear energy either, just reassessing safety issues and reactor locations (perhaps fault lines and coastlines are not the most sensible). And from a schadenfreude perspective, the shutdown of Energy Resources of Australia's significant Ranger mine for an as yet undetermined period has suggested a hole in global supply.

But an extra kicker came last week, industry consultant TradeTech reports, when the rumor mill started turning.

The reason the U.S. DOE is selling part of its uranium stockpile is to fund the environmental clean-up at the Portsmouth enrichment facility in Piketon, Ohio. The DOE has contracted engineering team Fluor-B&W to undertake the project, which is expected to last through to 2013. A total of 5.2mlbs of U3O8 equivalent is scheduled to be sold in quarterly installments.

The rumor that flew around last week was that Fluor-B&W had actually found a buyer for the full amount, meaning a significant supply overhang would be removed from the market. Sellers immediately backed off their offers, TradeTech notes, but buyers were keen to pay up. By week's end, the spot uranium price had risen one dollar on eight transactions totaling almost 800,000lbs.

Alas, late on Friday Fluor-B&W denied the rumor. TradeTech has thus set its weekly spot price indicator at US$57.00/lb, a rise of US$0.75 from the previous week.

The consultant's mid-term contract price indicator remains at US$59/lb and long-term at US$68/lb.