Uranium Prices: After Q2 Miss, Cantor Fitzgerald Slashes For In the second quarter of 2017, spot uranium prices averaged $21.55 per lb; well below Cantor Fitzgerald’s forecast for $27 per lb. Now, the bank is downgrading its expectations for the commodity while maintaining its forecast of an aggressive run-up in prices, albeit at a later date.
Cantor Fitzgerald lowered its 2017 uranium spot price forecast by 21.8% to $22.14/lb, and lowered the 2018, 2019, and 2020 forecasts to $28.75/lb (-36.1%), $42.50/lb (-35.8%), and $62.50/lb (-21.9%), respectively. While the bank is looking for significantly lower uranium prices in the near-term, longer term the company remains very bullish. The bank has a long-term price target on uranium of $80/lb beginning in 2022 as the supply and demand fundamentals of uranium will lead to a violent price increase.
Cantor Fitzgerald’s second quarter forecast was based on the impact of Kazatomprom’s January decision to reduce uranium production by 10%. But, this did not provide the expected sustained boost to uranium prices. Further complicating matters, the weak uranium market is keeping prices at unsustainably low levels that are causing some producers to buy from the spot market to fulfill their deliveries as it is cheaper to buy in the market than to produce.
Cantor noted that we are in a period where there are limited production curtailment opportunities available with nearly all primary production either for higher-priced contracted material or as a by-product for another commodity and revenues are purely seen as a cost offset for the production of the main commodity.
These forces are expected to continue and are the basis for the company’s downgraded forecasts. But, the bank holds that there will be a violent reversal with prices accelerating o $80 in 2022. They see $80 per lb as the long-term equilibrium price level that will incentivize production to compensate for the supply deficit. A supply deficit could emerge beginning in 2020 as demand for 216.9 million lbs will outstrip combined primary and secondary supplies of 213.7M lbs.