By Greg Peel

It had appeared for some time, after the first anniversary of Fukushima had passed (being the tsunami, not the ongoing "fallout") that US$50/lb was pretty much a floor in the spot uranium price. With Japan's nuclear future on one week and off the next, the spot price has been quietly slipping just below the 50 mark over past weeks, however there was always the expectation that the "must have" buyers ? those utilities with operational reactors who simply must buy fuel at some point ? would see sub-50 as an attractive price at which to pick up supply.

They have in the past.

Utilities mostly buy their fuel on long-dated contractual supply deals, it must be said, but typically there is additional supply to pick up or, indirectly, producers need to cover contract shortfalls with spot purchases, and that activity is enough to keep the traders and speculators from trashing the market. Or, simply, cheap prices are a good bet, particularly for the Chinese who work on long restock/destock cycles.

But not this time. Last week the uranium market lost its bottle as sellers became anxious and buyers stepped aside. Industry consultant TradeTech reports a total of 800,000lbs of U3O8 equivalent changing hands over the week and achieved prices dropped steadily with each new transaction. When the dust settled on Friday, TradeTech's spot price indicator had fallen a total of US$2.25 from the prior week, or around 5%, to US$43.50/lb. It seems like Fukushima all over again.

TradeTech suspects the price fall may not reflect total disinterest from buyers but rather, as can often be the case in any spot market (see: iron ore), buyers were standing aside to let the sellers panic and offer even cheaper opportunities ahead. If that is true, such low prices may not last too long. However we do still have the issue of whether they will/whether they won't turn Japan's reactors back on.

Having decided they would, and then decided they wouldn't, last week the Japanese decided to conduct some more seismic testing ahead of restarts next year, That is until they change their minds again, one presumes. It's not the sort of environment to encourage speculative spot uranium buying nor one in which operating utilities feel compelled to snatch up cheap yellow cake.

Unsurprisingly, no deals were transacted in the term market last week and TradeTech's term price indicators remain at US$50.25/lb (medium) and US$61.00/lb (long).

Australian-listed Toro Energy ((TOE)) -- no bull -- picked a bad week to announce approval had been granted by the Western Australian government for the company to proceed with its Wiluna uranium project in Western Australia, estimated to be capable of 1.8mlbs of U3O8 production per annum. Since a Coalition government took office from a Labor government in the state three years ago, the incumbent has spent that time conducting rigorous assessments and inviting public debate on the uranium mining issue.

Toro must now await corresponding approval from the federal government which has been conducting its own assessment over the same timeframe. Given former anti-nuclear activist turned government minister Peter Garrett was given the job of announcing the new Four Mile project go-ahead in South Australia a couple of years back, one presumes this won't be an issue.

Meanwhile, on the global front, any additional supply offered down the track from Toro will be offset by the decision from Areva to follow in the footsteps of BHP Billiton ((BHP)) and delay further ramp-up of its Trekkopje mine in Namibia due to too-low uranium pricing. BHP has shelved its Olympic Dam project for the foreseeable future on falling prices and rising costs and Areva suggests the Trekkopje project is not viable under a uranium price of US$57/lb, which currently seems like a long way away.

Despite all of the above, resource analysts are still largely of the opinion the uranium price must rise by next year given the aforementioned curtailing of significant future supply projects, the ongoing nuclear push from China, and the reality that Japan will eventually admit it can't live without nuclear power.