The Long-Term Indicator Is Misunderstood

Spot Prices Matter More as Market-Related Contracting Accelerates

The uranium market saw its two price reporters increase their long-term indicators upward for the monthly reporting period in September. Ux Consulting, LLC (UxC) raised their long-term indicator to $82/lb (from $80/lb) and TradeTech, LLC (TT) raised theirs to $84/lb (from $82/lb). Given that contract prices appear to be on the move again after a year of little movement, I am seeing a lot of public commentary around it and wanted to share some views as I think there are some missing pieces to the current dialogue.

Source: Ux Consulting, LLC, TradeTech, LLC, Cameco Corporation

Back on May 16th, I wrote an elementary piece called Deep Dive #3: Uranium Pricing 101, where I covered the basics of uranium price reporting. If you have not read this, it is a primer on the ecosystem around how and why uranium prices are reported the way they are.

Long-Term Contract Basics

First and most importantly, the long-term contract market is where utilities procure about 80-90% of their reactor needs. For deliveries under long-term contracts, there are two main pricing mechanisms:

• Fixed or Base-Escalated Pricing

• Market-Related Pricing

Fixed pricing is either: a fixed price, a series of fixed prices, or a base price plus an adjustment for inflation to the date of delivery otherwise known as a “base-escalated” contract. The adjustment mechanism in base-escalated contracts is either a combination of published indexes (from UxC or TT) or a fixed annual percentage rate (eg, an inflation rate.)