Uranium In A Total Bull Market And so it came to pass. An excerpt from last week’s Uranium Week:
“While the positive medium-long term story remains intact for listed uranium producers and soon-to-be producers, market analysts are beginning to feel the spot price, which has risen 52% year on year and 30% in the last three months, may be due for a blow-off top.”
Last week industry consultant TradeTech’s weekly spot price indicator fell -US$3.95 to US$69.20/lb.
It is not unusual, notes TradeTech, for the spot uranium market to change course with corrections when it goes through periods of sharp price increases or decreases. Currently, buyers in the spot market are largely discretionary and highly price-sensitive and had pulled back from the market after the recent uptick in the price to US$73.15/lb U3O8.
The buyers became unwilling to continue to chase up prices as sellers attempted to capitalise, prompting sellers to come back and meet the market.
While prices may pull back further before finding a new level of stability, the overall positive picture for uranium remains intact. Quite simply, demand is outstripping supply, and there is no change to that imbalance on the horizon in the near term.
Deficit
On the supply side, a production guidance downgrade from Cameco, Orano halting processing in Niger, and concerns surrounding transportation of nuclear fuel from Russia, along with questions about potential buying activity by state nuclear entity Rosatom, have impacted.
On the demand side, US bipartisan support for nuclear energy and domestic uranium production, EU taxonomy classifying nuclear as "green", South Korea reversing its nuclear phase out, Japan restarting reactors, and the Chinese nuclear build-out all conspire to push prices higher.
Add in buying from speculative funds the Sprott Physical Uranium Trust and Yellow Cake Plc and the trajectory is clear.
In recent news, two US representatives, one from each side, have reintroduced a bill to Congress to increase the quantity of enriched uranium and to ensure the availability of domestically produced, converted, and enriched uranium in the event of a supply disruption.
US Congress is currently shuttered until a new Speaker is elected.
US utility Standard Power has announced plans to build new small modular reactors in Ohio and Pennsylvania. Holtec International has sought approval to restart its Palisades plant in Michigan which was shut down in May 2022. If restarted, it would become the first successfully restarted nuclear power plant in the US.
A group of manufacturers, including Rolls Royce and Westinghouse, has been chosen for the next stage of the UK government’s competition for small modular reactor builders.
Everybody Wants In
Macquarie has increased its long-term uranium price forecasts by 16% to US$70/lb, believing incentive pricing levels are required to balance the growing demand (noting current demand remains higher than current mine supply).
Key industry tailwinds, outside of aforementioned supply constraints, include 266 new reactors proposed globally, with 59 under construction in 15 countries, physical purchases from aforementioned speculative buyers, an increase in utilities contracting levels (seen over 2022 and 2023) and lower levels of available secondary supply.
Natural resource investors Goehring & Rozencwajg suggest uranium has likely reached a pivotal inflection point that could force the price higher by as much as three to fourfold over the next several years.
For the first time in history, uranium has slipped into a persistent and widening deficit. G&R believes the results will be dramatic. Uranium is much less transparent than other commodity markets.
From the start of the nuclear age in 1945 until 2019, the uranium industry has gone through four distinct periods, G&R note. Each period has been unique in terms of supply and demand, leading to wild price swings that lasted decades. The market has now “definitively” entered its fifth major period, likely defined by persistent severe deficits.
Spot price volatility is not impacting on term market demand. TradeTech reports new demand emerging and several deals concluded last week. Offers have been submitted to several utilities seeking uranium contained in U3O8, UF6, and/or enriched uranium product (EUP) over multiple delivery periods.
TradeTech’s term price indicators remain at US$73.50/lb (mid) and US$62.00 (long).
Aussie Volte Face?
Nuclear energy could become a part of Australia’s energy mix as the country explores alternatives to coal. Analysis released by the Federal Government estimates the replacement of retiring coal-fired plants by nuclear power could cost as much as $387bn.
However, according to David Tuckwell, Senior Product and Investment Strategist at Global X ETFs, the re-emergence of nuclear solutions in the Australian conversation indicates the increasing international recognition of nuclear energy may be having an effect on the country’s domestic stance.
“Australia has had a ban on nuclear power for the past 25 years and remains the only G20 nation to have federal laws against nuclear reactors, but as net-zero targets loom, the government’s stance may have to change,” Tuckwell says.
Australia is one of the world’s largest producers and exporters of uranium but has no nuclear energy capacity of its own (outside of a small plant producing medical isotopes). Successive governments have pondered, then dismissed the thought of nuclear power, fearing a backlash from the electorate, but more so the power of the local coal lobby.