Uranium Weekly: LT Contracting Tracking at Best Pace in a Decade
TD Investment Conclusion
The Ux Consulting (UxC) weekly spot price indicator published earlier this week increased to US$53.70/lb (+US$1.60/lb w/w). The April 2023 month-end term contract price remained at US$53.00/lb The term price is at its highest level since September 2013 and UxC believes that given ongoing activity in the term market, the term price indicator remains under upward pressure.
Total term contracting volume increased by 33 million pounds in April and now stands at 88.4 million pounds year-to-date. This is the most contracted volume to the end of April that we have on record dating back to 2010 (see Exhibit 1). In 2011, 87.9 million pounds was contracted to the end of April. UxC recently noted that "offer levels remain firm, but given ongoing concerns over future supply availability and mid-term supply tightness, the market continues to anticipate continued upward price pressure".
Last week, Cameco reported that it now has 215 million pounds of uranium committed under long-term contracts (an increase from 180 million pounds reported with Q4/22 results) and more than 70 million kgU of UF6 conversion services with deliveries spanning more than a decade. On average, over the next five years, Cameco has 26 million pounds of uranium under long-term contract, the highest level the company has achieved in seven years — and a 5 million pound increase relative to what the company reported with Q4/22 results (Exhibit 2).
The spot uranium market has been relatively quiet. Year-to-date, only 16.7 million pounds have been transacted, well below the 5-year average to the end of April of ~28 million pounds. The Sprott Physical Uranium Trust (SPUT) has been notably absent from the market, purchasing only ~2.4 million pounds. As of yesterday's close, SPUT's share price was trading at 13% discount to its net asset value. Despite SPUT's lack of activity, the spot price has seen recent upward pressure. UxC noted that buying interest returned to the market last week from a number of market participants across traders, producers and utilities.
In our view, the outlook for uranium prices and the nuclear sector in general is the best it has been in more than 15 years. Governments around the world and across the political spectrum are waking up to the fact that nuclear power will play a central role in a low-carbon, stable electrical grid and are reviewing and updating nuclear power policies to support the nuclear power sector. We are forecasting a uranium price of $53.57/lb in 2023 and $58/lb in 2024. Our long-term price is $65/lb.