Know Your Business Part 6: The Uranium Market

The uranium market is very different from most other commodity markets.  Instead of uranium being traded in an organized commodity exchange like gold, silver, and copper, it is traded through negotiated contracts most often between a uranium mining company and an electrical utility.

Unlike most other commodities, uranium has only one single significant commercial use – fuel for the world’s 440 operating nuclear reactors.  So there aren’t very many transactions occurring – sometimes only three or four transactions in a week.

There a basically only two uranium price markets, the spot price market and the long term price market.

The Spot Price Market:
The spot market usually applies to a single delivery priced at or near the published spot price and usually account for only about 15-20% of the total market.

Long Term Price Market:
The remaining 80-85% of uranium sales are sold in the long term market.  The long term market is usually structured in multi year contracts that are typically in three to five year terms but can be as long at 10 years.

Investors, accustomed to the other commodity markets,  often look to the spot price when they talk about and consider future sales for a uranium company. They should be looking at the long term sales price instead since it accounts for the vast majority of the market and gives a much more accurate picture of the uranium market.

There are only two weekly uranium price indicators that are accepted by the uranium industry and published by Ux Consulting and Trade Tech.  These two organizations independently monitor, analyze, and report uranium market offers, bids, and transactions. They report their findings weekly and are usually pretty much in sync with each other.  It’s important to note that the prices they report are their best judgment from the data they gather as evidenced from Trade Tech’s definitions of their Spot Price Indicator and Long Term Price Indicator.

The Weekly U3O8 Spot Price Indicator is TradeTech’s judgment of the price at which spot transactions for significant quantities of natural uranium concentrates could be concluded as of the end of each Friday.

The Long-Term Price Indicators for U3O8, Conversion, or SWU are TradeTech’s judgment of the base price at which transactions for long-term delivery of that product or service could be concluded as of the last day of the month, for transactions in which the price at the time of delivery would be an escalation of the base price from a previous point in time.

References for this post:

World Nuclear Association – Uranium Markets
Trade Tech – Uranium Primer – Uranium Contract Pricing
Ux Consutling – About Uranium Prices
Wikipedia – Uranium Market

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