Cameco Production Delay May Cause Uranium Price Hike

The uranium market should see plenty of activity after the world’s largest uranium producer announced a production delay on Monday, and spot prices held steady last week.

Cameco Corp. (CCJ) announced Friday afternoon that it has suspended operations at its Port Hope uranium conversion plant. The company said it found uranium and evidence of other production-associated chemicals in the soil beneath the plant, which will likely lead to a production delay of at least two months.

Cameco shares were down more than 6%, or C$3.05, to C$46.27 at around 10:35 a.m. ET Monday. Port Hope is one of only three commercial suppliers of uranium hexafluoride (UF6) in the western world, according to a Wellington West Capital Markets report. Cameco said there is no related cost estimate yet, while its second quarter report is expected to include a revised forecast.

Meanwhile, prices for spot uranium held steady at US$129 per pound after falling for three straight weeks, TradeTech’s Nuclear Market Review said in a July 20 report. Uncertainty from Cameco’s announcement is largely to blame, it added. Weak demand and ample supplies have helped bring uranium prices down recently. Of particular note, was the U.S. Department of Energy’s announcement that it will sell eight lots of UF6, equivalent to 522,000 pounds of U3O8.

Active spot supply is slightly above 3 million pounds, while demand is less than 1 million pounds, TradeTech said. Why the imbalance? Utilities have been building inventories during the past few years; rising prices have strained budgets, keeping others out of the spot market; and buying by investors and speculators has fallen, while spot supply has risen.

“However, the news that Cameco’s conversion facility will be shut down for a minimum of two months [equating to a minimum loss of 2,000 tonnes of UF6 production] is expected to place significant upward pressure on the spot price,” TradeTech said, suggesting that while the company may have plenty of inventory, the psychological impact of this news on the market may be significant.

CCJ 1-year chart

Comments

[dcappe10]

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