Next Uranium Auction Could Fetch $80 per Pound or More

By James Finch

The weekly TradeTech uranium spot price indicator remained unchanged for a third straight week, but Tuesday’s sale of 100,000 pounds U3O8 could result in another record price spurt. According to Nuclear Market Review (NMR) editor Treva Klingbiel, “This lot of material represents an opportunity for buyers to secure material at a fixed price and is expected to be highly sought after.”

It's been two months since the last uranium auction. That one led to a record price jump in yellowcake. How will this auction compare? It could be an eye-opener.

Klingbiel pointed out in the February 16th issue of NMR, “The majority of other supply currently available to potential buyers is being offered with market-related pricing terms at time of delivery.” Utilities and other buyers hesitate to accept U3O8 and related product under these terms. As a result, the spot uranium price has remained nearly unchanged for the past two months, aside from a small percentage increase at the end of January.

Activity has come to a standstill at these lofty price levels. Uncertainty about remediation efforts by Cameco Corp at its Cigar Lake uranium project has left buyers and sellers at odds with each other. As TradeTech has told us during this two-month stalemate, buyers are nervous about paying these prices, while sellers are confident they can get even higher prices. Three weeks before the Cigar Lake flood, we reported that some utilities believed the uranium price would decline to $30/pound. By mid December, the price had jumped another 50 percent above October’s high levels.

The significant problem buyers now face is being forced to blindly agree to purchase uranium without knowing the final price tag. Contracts for the sale of uranium lack a fixed price. Because contracts are written under ‘market-related pricing terms,’ U.S. utilities and others would never really know the final cost of their purchase until months later, when the product would be delivered. Buyers might worry the final price tag could be many percentage points higher than what they believed they might be paying.

In light of these market conditions, we believe the modest sale of 100,000 pounds U3O8 would likely result in a new record spot uranium price. Treva Klingbiel is accurate in her forecast for the February 20th auction – this uranium should be highly sought after. Numerous crystal ball gazers have predicted the spot uranium price should reach $80/pound after the sealed bids are opened next week. Some have called for an even higher price tag.