RBC 'Uranium Watch': Kazatomprom announces ~20% production c | Produced by Wong, Andrew (RBC Dominion Securities Inc.) on Monday, December 04, 2017, 10:01 AM ET |
| Disseminated on Monday, December 04, 2017, 10:08 AM ET |
Summary: Kazatomprom announced plans to reduce planned uranium production by 20%. The production curtailment is expected to last for three years starting January 2018, resulting in deferred production of 11,000 tonnes (~30Mlbs) over the period, or average 10Mlbs annually.
For 2018, prior to the production cuts announced by Kazatomprom, we estimated an annual surplus of 7Mlbs.
Our view: We believe the announced production cuts from Kazatomprom will help significantly tighten the uranium S&D outlook. Although based on our S&D model, 2019 and 2020 may have moderate surpluses after taking into account the Kazatomprom cuts; we believe fuel buyers will become increasingly nervous on security of supply beyond 2020 and be willing to have more serious discussions on higher prices for term contracts. Overall, this is in line with our view that the uranium market has long-term price upside as the current spot price is uneconomic.
RBC Uranium S&D pre-Kazatomprom cuts
Source: UxC, WNA, RBC Capital Markets estimates