By Andrew Nelson

November was a little kinder to uranium producers than September or October was, with new demand trickling into the market and providing some support for spot prices. Not much ground was gained, but it was at least a little, and more importantly for sellers is that the current momentum remains upwards.

Industry consultant TradeTech's November 30 Uranium Exchange Value was US$42.50 per pound last Friday, up US$1.50 from the end of October and up US$0.75 from the previous Friday's mark. There were 19 transactions over the course of the month seeing over 5m pounds of U308 equivalent changing hands. The buyers were represented by utilities, traders, and financial entities, while the sellers were comprised of producers and traders.

One of the main factors that brought that spurred on turnover was the low prices after the downward run in the spot price through the month of October. Thus, buyers were keen to lock in supply at what were historically attractive prices.

Another bit of good news for sellers is that despite the slightly higher prices over the course of the month, there remains active demand in the market, so December may also get off to a positive start. TradeTech reports one non-US utility is looking for more than 1m pounds for delivery in 2013, with offers due no later than December 10. There is also a combination of both US and non-US utilities that are also looking for around 1m pounds for spot delivery, while several other buyers are making inquiries.

The lift in short term demand also flowed through to the term market, with TradeTech's Mid -Term U308 Price Indicator up US$2.00 to US$47.00 per pound over the course of November. As almost always, the Long-Term Price Indicator remained at US$59.00 per pound.

Further brightening the picture of emerging supply was news from TradeTech that demand is now starting to outstrip supply. Active uranium supply dropped to just 3m pounds U3O8 equivalent over the course of November, while active uranium demand increased to 3.5m pounds.

Analysts at Britain's BMO Capital Markets have thrown a bit of a wet blanket on the party, however, noting supply will likely remain broadly in balance up to 2017 before the market stats to see a sustained deficit. The team notes there are several years of oversupply and excess inventories sitting in the market, which will mean utilities will enjoy a few more years of being able to be price selective.

Given the cap on near term prices, the broker predicts uranium supply will fall over the short to medium term to match demand. However, overall supply is expected to grow at an average of 4% per year through 2025 from current levels. The main issue for shorter term supplier that manage to weather the short term storm is that the 4% growth average is weighed heavily towards the end of the period, thus providing little help to sellers dependent upon current prices.

The view has seen BMO reduce its uranium price forecasts for Q412 and 2013. Q4 prices are now expected to average at US$48.00 per pound (down US$2.00), while the average price for FY13 is expected to come in at US$50.00 per pound versus US$55.00 previously. The broker's forecast for 2015 and beyond has been lifted by US$10.00 to US$70.00 per pound to better reflect rising production costs.