U sector could be by 2016 Uranium market update from CCO earning report
“Since the previous quarter, the uranium market has seen little change. Near to medium-term uncertainty continues to impede a recovery, with neither buyers nor suppliers seeming to feel much pressure to contract. Most suppliers have significant commitments out to 2016, and utilities are well covered for a similar period. As a result, over this quarter, volumes contracted have remained low, and uranium prices have been relatively stable.
As we have noted in previous quarters, we believe the market will remain in this 'wait-and-see' mode until catalyzed by events such as reactor restarts in Japan and a significant return to long-term contracting by utilities. We expect to see both of these catalysts realized, though the timing remains unclear. In our view, utilities are beginning to move into the window of time during which they would normally begin contracting for requirements in 2016, and, as the regulatory process is worked through in Japan, we believe reactors will be restarted in 2013. The process began in January, when the Nuclear Regulatory Authority (NRA) issued draft safety guidelines outlining the proposed requirements for restart. The guidelines have now been released for public comment, with the final guidelines expected in July. We are in frequent contact with our Japanese utility customers and understand that they are investing significantly to prepare their nuclear assets to meet the requirements for restart. ”
Anyone who follows U sectors knows that the recovery in this sector is dependent on Japan restarting its reactors. I was expecting that by the beginning of next year recovery in the sector may start. After reading the earnings report of CCO I am not sure any more. Japan is still the trigger. I find three things that concern me. According to CCO they do not expect improvement in demand by 2016. That is three years & long time & not just seven to nine months that I was expecting. Second thing that concerns me about U sector is increasing inventory. CCO inventories increased this quarter from $563m to $741 million that is a jump of 31.6%. This is very bad trend of constant increase. When inventories are constantly increasing then it brings me to the third issue or impact. The U308 spot prices, which are holding on to $40 support for a while & may break when producers are forced to liquidate them. When & if $40 spot price breaks then there is a chance that U stocks may see more weakness or they are not going up in a hurry even if the recourse sector rebounds from the present sell off.