Note To Clients The United States Congress is preparing for critical votes on legislation impacting the country’s uranium industry, focusing on the Nuclear Fuel Security Act (NFSA) and a potential ban on Russian uranium imports.
The proposed NFSA promises to direct about US$2 billion towards revitalizing the domestic uranium and nuclear fuel sectors, upon approval, as a matter of national security. The funding may come from standard government appropriations or special emergency allocations by the White House. This governmental engagement has already been a catalyst, driving uranium prices up 71% year-on-year to a current high of US$82.30 per lb. of uranium oxide from below US$20.
But Russia might beat the U.S. to the punch and turn off the tap of uranium exports to the U.S. first. Bloomberg reported on Dec. 15 that Tenex, a Russian state-owned uranium enterprise, was cautioning its American customers about the possibility of Russia pre-emptively stopping uranium exports to the U.S.
This potential move comes in response to the NFSA that would ban imports beginning in 2028. The strategic maneuvering comes as the U.S., reliant on imports for about 40% of its nuclear fuel from countries like Russia, Kazakhstan, and Uzbekistan, is looking to reduce this foreign dependence.
The US uses about 47 million lb. of U3O8 per year with about 20-24% coming from Russia. “We may see immediate panic and speculation leading to a spike (overshoot) before the market settles,” Red Cloud Securities uranium analyst David Talbot said in a Dec. 11 note to clients. “The spot market is very thin and much inventory overhang was removed slowly.
“Given the very tight market, adding psychology to the equation in addition to strong supply/demand fundamentals could lead to rapidly rising uranium prices,” Talbot said.
Russia’s growing dominance in the uranium and nuclear space means it could potentially fill its sales quotas in emerging markets, Talbot continued. He explained the Russians are building one-third of all the power plants globally, “and they are coming into these developed nations.”
“They are not only teaching them how to set up regulations, but they are financing them, building them — they are going to provide them [with] uranium, [then] take the uranium away at the end of the day. So, the Russians are becoming the one-stop shop and doing it aggressively,” he wrote.
Strong fundamentals
The potential American and Russian moves are set against a background of rising uranium spot prices while demand for the energy metal expands as more nations seek alternatives to fossil fuels.
Uranium prices are up about 71% year-on-year to a current high of around US$82.30 per lb. of uranium oxide from below US$20. Credit: Month-end prices published by UxC and TradeTech
Alongside the NFSA, Congress will deliberate on the Prohibiting Russian Uranium Imports Act, which aims to halt the imports within 90 days, replacing the 2020 Russian Suspension Agreement, unless specific waivers are granted. Talbot expects an 80% chance of its enactment.
Citing sources familiar with the situation, Bloomberg revealed that Tenex’s U.S. branch had informed various electricity firms, including Constellation Energy (NASDAQ: CEG), Duke Energy (NYSE: DUK), and Dominion Energy (NYSE: D), to expect such a development. However, it was noted that the Kremlin had yet to make a definitive decision.
Meanwhile, Rosatom, Russia’s state nuclear corporation and Tenex’s parent company, has refuted claims of issuing such warnings to its U.S. clients.
Talbot stresses that Russia’s impact will likely extend beyond its borders and make it easier for the rest of the world to meet their energy requirements and access nuclear power, from financing to setting up a regulatory regime to uranium procurement and reactor construction.
With voting imminent on the NFSA, which is integrated into the National Defense Authorization Act, the bill enjoys bipartisan support, which implies essential funding for the Department of Defense and is likely to pass swiftly through a ‘voice’ vote.
U.S. lobby group The Uranium Producers of America has strongly endorsed the legislation, pointing to its potential to trigger significant domestic investment.
Equities react
Anticipation of the Russian import ban has already stirred the uranium market, with prices climbing amid widespread speculation. The U.S. faces a significant supply shake-up with the potential ban, likely leading to increased market volatility and price hikes.
Talbot expects that a U.S. ban could prompt Russia to stop uranium exports immediately, adding further turmoil to the market. This would significantly affect U.S. and European utilities dependent on Russian uranium. Alternative supply routes, like through Turkey’s Trans-Caspian Route, are being considered but come with higher costs and limited capacity, the analyst suggested.
While the market is in turmoil, speculators are having a field day with uranium equities. On De. 18, the first trading session following the Bloomberg report, the uranium trading screen was lit up green as investors piled money into the sector amid the strong fundamentals for the radioactive metal.