Almost three million pounds of uranium have changed hands in the spot market this week, five times more than the average volume. The result is that after an 80% run-up over the past eight months, uranium prices have tumbled. They reached a three-year high of $73 a pound in February, but dropped $13 earlier this week and fell to $49.25 on Wednesday, according to Ux Consulting Company.
At the same time, some utilities and even producers have stepped in to buy the metal in the belief that the demand for more nuclear plants will remain. A total of 65 nuclear units are under construction, mostly in China and Russia. Despite the bearish news in recent days, traders note that more than 400 reactors are still operating, consuming about 180 million pounds of uranium a year. Nuclear power accounts for 14% of global electricity output
Most of the uranium traded in the physical market is in the form of uranium oxide concentrate, which is several steps away from being used as nuclear fuel. After utilities buy uranium on the spot market, these facilities convert the oxide into a gas form of pure uranium, called uranium hexafluoride. The gas, which is radioactive, is then enriched to become nuclear fuel. It is then transported to fabrication centers to convert into a pellet, which is put into a fuel rod that goes into a nuclear reactor.
NFRC believes the current drop represents a short-term impact and the fundamentals for the market are still very strong. (WSJ, 3/17/2011)
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