The spot market is a financial market where a commodity is traded for immediate delivery, usually within 12 months. For uranium, UxC’s prices reflect delivery of at least 100,000 lbs at a Western converter (i.e., Cameco, ConverDyn, or Orano) within three months. By contrast the long-term market reflects prices for delivery of significant volumes beginning at least three years from today and over a duration of at least five years.
Historically, the market has traded in contango with long-term uranium priced at a premium to the spot price. There have only been a few examples of spot trading at a premium to term (backwardation) including:
The commodity supercycle, 2007
Kazakhstan production decrease, 2020
The formation of the Sprott Physical Uranium Trust (SPUT) as well as several other new buyers entering the market including new hedge funds and junior miners, 2021
The Russian invasion of Ukraine, 2022
The coup d’etat in Niger, 2023
Sulfuric acid shortages
Kazatomprom guidance cut, 2024
The spot price reached $107 in February 2024 before buyers backed away from the market. As the market cooled, the uranium spot price began a gradual decline throughout the year. The spot price declined further in recent months following excess supply being dumped into a very thin market. By contrast, last year, we saw the term price increase every single month with the exception of December.
The two markets can be characterised and perhaps better understood by looking at their respective participants. The spot market is much smaller, and investor driven. Only c.15% of utility contracting for uranium is done via the spot market, with the majority of their requirements secured in the term market. According to UxC, the market booked a total of 383 spot transactions in 2024, involving 42m lbs of U3O8. This marked a reduction in volume from 2023 levels (49.3m lbs) explained by reduced buying by investment funds and US utilities.
Intermediaries are the only active players in the spot market currently. With few end users and many intermediaries, much of the same material is recycled until a utility, producer or sequester enters the market. Sequesters, such as Sprott on the other hand, remove this material permanently from circulation, supporting uranium prices. Consequently, the spot market is not particularly indicative of actual uranium demand but rather a reflection of intermediaries’ sentiment.