Morgan Stanley comments on the outlook for uraniumAccording to Morgan Stanley:
Sector Outlook
Uranium
Robust nuclear power generating capacity growth in China and the US, with Japan’s economic need to re-activate its capacity, act together as a potent price driver.
Back to the floor
Uranium
• Rally, then stall: After an active 1Q (price +11% to nearly US$40/lb), the tightly traded uranium spot market (about 10-15% of global trade) slipped back to the US$35/lb-level. Industry feedback highlights the onset of the northern summer as a bearish factor – with utilities holding sufficient stock for now. We expect no upside price driver in H2.
• Two monster mines step up: 7 years after its original commissioning target, Cigar Lake is finally delivering its first commercial oxide real tonnage – 2.6ktU (70Mlb/yr) in 2015, up to 7ktUpa (180Mlbs/yr) by 2020. Similarly, Husab in Namibia is set to fire in 2016: initially at 1ktUpa (30Mlbs/yr) before ramping to 3.8ktUpa (100Mlbs/yr) by 2019.
• Still got a deficit on the horizon: Beyond these ops, there are no other plans for mining growth in the foreseeable future. The unresponsive, low oxide spot price is deterring investment in mine capability for now. China’s majority-owned Azelik mine in Niger has been indefinitely suspended, in response to the low price; ERA recently confirmed that the Ranger 3 Deeps project will not proceed. Biggest model adjustment? Olympic Dam’s mill failure takes 1.2ktUpa (32klbs) off 2015’s total.
• New nuclear build: MWe globally set to lift 5% in 2015; 7% in 2016 – the fastest rate in a decade – driven by China and India. Meanwhile in Japan, two reactors are scheduled to restart in Oct-15, although like 2014, the event is subject to various approvals. We forecast another 7 restarts for Japan in 2016.