Spot Uranium Grinds To A Halt

By Greg Peel

The mismatch between demand for spot uranium in Europe and supply in the US reached its ultimate conclusion last week when simply no one wanted to play. That mismatch, clearly explained in last week's report ("Uranium Mismatch Continues To Frustrate") has been driving down transaction volumes in the spot market even as medium and longer term demand begins to emerge from the dust of Fukushima. Last week, reports industry consultant TradeTech, there were simply no transactions reported.

This means TradeTech's spot price indicator remains unchanged at US$52.00/lb while term prices are also unmoved at $54.50/lb (medium) and US$61.00/lb (long).

There was nevertheless some news last week to pique uranium industry interest (and to save this writer from having nothing to say). For the first time since 1978, when the Three Mile Island reactor accident brought the nuclear danger to the point of reality and prompted Jane Fonda and Jack Lemmon to film The China Syndrome, the US Nuclear Regulatory Commission has approved the construction of a new nuclear reactor. Two in fact, near Augusta, Georgia.

Is this the beginning of a US nuclear renaissance?

No, say industry pundits. The new reactors are more of an exception that proves the rule rather than a new rule, and aside from a couple of other reconstructions of old reactors these are the only two reactors expected to be built in the US in the next decade.

The problem is that US electricity demand is not growing as it once did and the price of local natural gas is extremely cheap due to its abundance and ongoing production development. Cheap gas alone is enough to encourage utilities to build more gas-fired power stations rather than anything else and the incentive becomes even greater as old coal-burning plants are forced to retire under stricter environmental rules. Natgas is still a fossil fuel but it is a lot "cleaner" than coal and gas-fired power stations, can be built a lot quicker than nuclear plants and costs a lot less.

New nuclear plants are simply not commercially viable without US government subsidies provided on a general policy of reducing greenhouse emissions. Unless the gas price starts to run hard to the upside, which seems a-ways off at this stage, and the US government again contemplates the introduction of a carbon trading scheme, nuclear energy expansion is just not on the cards in the US.

With Japan having shut down nearly all its reactors, and Europe attempting to shift away from nuclear power post Fukushima, it really only leaves China as the champion of reactor construction in the foreseeable future.  

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