Uranium Market Fundamentals

There is no formal exchange for uranium. The commodity is not traded on an organized exchange such as the LME and only recently has NYMEX offered structured uranium futures contracts (full specifications for these contracts can be found here). While uranium futures are a useful hedging tool for producers and users uranium, the transparent pricing mechanism provided by the NYMEX contracts means that speculators are becoming an ever-growing market contingent. The pie charts below shows the changing composition of buyers in the Uranium U308 spot market between 2000 and 2012.

Uranium price indicators are developed by a small number of private business organizations such as TradeTech and UxC Consulting who assess price related data and analyze developments that affect the uranium market. The UxC Consulting Company is a leader in the nuclear industry and their Uranium U308 price indicator provides the final settlement price for the NYMEX contract mentioned above. Uranium U308 the chemist’s name for the compound however it is also known as ‘yellowcake’ uranium which is a lot less intimidating. The term ‘yellowcake’ comes from the metals early production methods which resulted in a bright yellow product resembling cake batter.

The graph below shows the full spot price history of the spot Ux U3O8 price index. Beginning in 1988 the price fluctuates at a level just shy of $20 until 2005 when the price begins to climb drastically to a peak of around $135 in 2007. I will discuss this price rise in my later posts. In the aftermath of the bubble the spot price has remained closer to the $50 mark and has been significantly more volatile. This increased volatility is a result of increased trading activity in the market as traders attempt to make a quick profit. Record spot market activity was observed in 2010 when the spot price broke through the $60 mark for the first time in two years.