Uranium Weekly: U.S. Unfilled U3O8 Requirements Climb in 2031/32
TD Investment Conclusion
The Ux Consulting (UxC) weekly spot price indicator published earlier this week declined slightly to US$56.20/lb (-US$0.30/lb w/w). Over the past month, the spot price increased by US$1.60/lb and year-to-date, the spot price has increased by ~17%. The spot price is at its highest level following the sharp price increase immediately following Russia's invasion of Ukraine. UxC increased its June month-end term price to US$56.00/lb, an increase of US$1.00/lb from the May month-end price. The term price is at its highest level since August/September 2013.
The U.S. Energy Information Information Agency (EIA) released its 2022 Uranium Marketing Annual Report on June 13. U.S. utilities purchased a total of 40.5 million pounds U3O8-equivalent (U3O8e) from U.S. suppliers and foreign suppliers in 2022, at a weighted-average price of $39.08 per pound U3O8e. The 2022 total of 40.5 million pounds U3O8e is ~13% lower than the 2021 total of 46.7 million pounds U3O8e. The 2022 weighted-average price of $39.08 per pound U3O8e is 15% higher than the 2021 weighted-average price of $33.91 per pound U3O8e and the highest price since 2016.
Canada and Kazakhstan were the largest foreign suppliers at ~11 million pounds and ~10 million pounds, respectively; Russia supplied ~4.8 million pounds or ~12% of the total. Data on U.S.-origin supply was withheld (Exhibit 1).
The report also provided details with respect to U.S. utility unfilled uranium requirements over the next 10 years. On a cumulative 10-year forward basis, unfilled requirements declined ~1.6% y/y compared with YE2021 to a total of ~179.2 million pounds (Exhibit 2). U.S. utilities are well-covered over the next five years, with only 31.3 million pounds of requirements unfilled; over the past decade, unfilled requirements over the forward five-year period averaged ~54 million pounds.
Although cumulative unfilled uranium requirements have declined substantially over the past 20 years, we note that at YE2022, unfilled requirements at the tail-end of the 10-year forward time frame (2031/2032) took a notable step higher (Exhibit 3). This could reflect reactor life extensions and/or tighter forward supply. In our view, it underscores why utilities have ramped-up their term contracting activity over the past year as security-of-supply concerns become more prevalent.
We believe that 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 realizing 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 US$53.57/lb in 2023 and US$58/lb in 2024. Our long-term price is US$65/lb.