Uranium continues to perform exceptionally poorly

The disaster for uranium prices has continued to roll in in 2013. The price of U308 are now down almost 20% since the start of the year to $35/lb, which is levels not seen since 2005.

Its also not clear what is going to tip the balance towards better prices anytime soon.

The expiry of the HEU agreement between the US and Russia at the end of this year has failed to provide any concern for buyers.  This is perhaps not overly surprising given it has been on the cards for a long time and buyers have been able to negotiate alternative supplies.

Consumption is anticipated to rise quite a bit next year, although that again rests on whether Japanese facilities will be bought back online, which have been delayed for years. Inventories have done nothing but grow in the interim.

And while secondary supply is expected to be reduced, mine supply should show reasonable gains not withstanding very low prices.  Cameco's Cigar Lake is finally set to start production, with the huge price spike in 2006/07 attributed to fears around this project almost 7 years ago.

Further hindering the price of U308 is the continued decline of SWU prices, which is one of the costs involved in enriching U308 and is essentially substitutable for raw materials.  The lower the price of SWU, the better the economics are for extra processing rather than using more raw U308.

The SWU price collapse has been going on for sometime and are now below  2005 levels. The decline since the start of the month has effectively reduced required consumption of U308 by ~2%.

Picking the bottom of uranium prices is much harder than in other commodities because the market is very opaque, consumption is modelled and inventories are not disclosed.  For my money, its probably not worth trying to chase a bargain in uranium at this stage, as even though prices are incredibly low, its not clear why that is going to change.