By Greg Peel

The spot market for uranium was never of much interest until the big surge took prices up well over US$100/lb in 2006. In that era, legacy contract obligations at much lower prices impacted on the earnings potential of the large and long-established players, such as Energy Resources of Australia ((ERA)) in Australian terms, while new kids on the block, such as Paladin Energy ((PDN)) relished the opportunity to secure contracts at more spot-aligned pricing.

Fast forward to the post-Fukushima era of 2013 and the tables have turned. Those noughties contract obligations have largely run off and the uranium price is wallowing in the depths. Lower cost, long-established producers such as BHP Billiton ((BHP)) can at least bungle along (ERA has had its own specific production issues) while the high-cost later entrants are struggling to stay afloat. Paladin is the classic example.

It is interesting to recall that back in the uranium bubble period, one supportive argument for pricing into the future was that of the ultimate completion of the US-Russian HEU (highly enriched uranium) agreement, known as "Megatons to Megawatts".