How Important Is The Spot Price of Uranium?

Though the spot price of uranium has fallen to US$34.50/lb.—a far cry from the US$140/lb it fetched a few years prior—how important is the spot price of uranium? The answer: not as important as the long-term price. In fact, over six times more uranium is traded in long-term market prices than in the spot market price. Most investors in the commodity universe understand the spot price for metals. A simplified definition of the spot price is what the metal costs to buy or sell right now, minus the commissions and fees. Oil, for example, trades billions of dollars a day on a spot price. For copper producers, unless they are hedged, the spot price is the price that matters to them when they sell their production.
The Dubious Uranium Spot Market
I say dubious because less than 15% of the metal is actually traded on spot prices. In the uranium sector, there are two types of markets: the spot price (less than 15% of the market—and as low as 5%); and the long-term price (over 85%). Currently, the long-term price for uranium is over 50% higher than the spot price. The long-term uranium price is currently set at US$57 per pound, whereas the spot price as of this writing is US$34.50.

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