Uranium spot market prices drift lower

Falling almost continuously since the summer of 1987, the U3O8 spot price was being reported at the end of January by German firm NUKEM as ranging between $11.40 and $11.85(US) per lb.

And American uranium brokerage firm Nuexco is quoting a January exchange value of $11.60.

More than a decade ago, monthly exchange values were being quoted in the $43 range.

According to NUKEM, the current period of falling prices is one of the longest since the 3-year decline which took place between the fourth quarter of 1979 and the fourth quarter of 1982.

Another American firm, The Uranium Exchange Co., ties the falling spot prices to the actions taken by American producers during the past three years on legislative and judicial fronts.

“During 1987, the uncertainty of the outcome from the miners’ lawsuit kept free market forces from dictating prices while producers and utilities maintained a hedge against higher prices by building inventories,” says the company in a recent report. Lower spot volume A number of other observations about the uranium market in 1988 are contained in a NUKEM report, including that spot volume was about 85% of the 1987 volume, the third consecutive year the volume has decreased; U.S. producers recorded about 50% of the total spot sales; and, about 65% of the total volume was bought by U.S. utilities.

The German company says the average of its price range dropped by about 28% between January and December last year, or about 33% when expressed in Canadian dollars.

Distinguishing the current period of declining prices from past periods of declines and increases, NUKEM says, is a combination of lack of significant demand, the absence of discretionary buyers and the presence of aggressive sellers.

The Uranium Exchange reports 11.7 million lb of U3O8 equivalent were traded in 1988, about two million pounds less than in 1987.

“The volume seems low given the nearly $5-per-lb decline in prices over the 12-month period,” writes the company.

“More telling for the market in 1989, however, is that much of the buying in 1988 was for requirements in 1989 and beyond, which drains even more the quantity of material being sought on the market for short-term requirements.”

Canada, with uranium mines in Saskatchewan and Ontario, produces about one-third of the world’s supply.

The top importer-country of gold in 1988 was Taiwan, according to reports out of that country. More than 354 tonnes of gold bars and coins were imported by the Chinese island nation, which supplanted Japan as the world leader.

Two main reasons are given for the higher imports: boosted purchases by the country’s central bank and the lifting in July of a 5% tax on bullion trading. The U.S., Hong Kong, Switzerland and South Africa led the way in supplying Taiwan with gold.

Rising aluminum prices last year helped Alcan Aluminum of Montreal record its largest profit ever; net earnings in 1988 of $931 million(US) were double the company’s 1987 profit.

Ingot products climbed 48% in price to $2,210 per tonne in 1988, and fabricated products rose 18% to $3,371 per tonne. In London, aluminum averaged $1.18 per lb last year, compared with 70 cents in 1987 and 52 cents in 1986.

Not to be overlooked in the metals price boom is molybdenum, whose free-market price averaged $3.48(US) per lb in 1988, up 18% from the previous year.

The rise in the metal’s average price, according to investment firm Shearson Lehman Hutton, has more to do with the efforts by major U.S. primary producers Amax and Cyprus to limit production, than to the underlying strength of demand.

Increased production of molybdenum-containing grades of stainless steel and low alloy steels helped buoy demand for the metal last year. Shearson estimates non- communist world consumption rose by 12.5% last year to 170 million lb, while demand, including exports to communist nations, increased by less than 10% to 190 million lb.

While demand has risen, Shearson cautions that over-capacity remains a problem. Current capacity is estimated to be about 275 million lb per year; production last year totalled an estimated 180 million lb, including about 112 million lb which was turned out as a by-product or co-product of copper production.

Shearson says major primary molybdenum producers have been trying to trim back their output in recent years to better achieve market balance. The U.S., Chile and Canada are listed as the top three non-communist-world producers of the metal.

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