NYSEAM:UEC - Post by User
Post by
mangoeon Oct 20, 2024 3:28pm
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Post# 36273848
π¨βπ« Last week the quoted Spot price for #Uranium β
π¨βπ« Last week the quoted Spot price for #Uranium β 
Last week the quoted Spot price for #Uranium Conversion soared to a new all-time record high of $76.75/KgU
which, along with the record high price for enrichment SWU, is a leading indicator for the future price of mined #U3O8.
Most commodity investors don't understand the unique #Nuclear fuel contracting chain of events that drives demand and market price of canned yellow cake #U3O8.
Let me explain: 
First of all, Nuclear engineers analyze the operating characteristics of their reactors to determine the specifications for future refueling loads of fuel bundles needed (or in the case of brand new reactors, the 3X annual fuel requirements loaded at start-up). They notify their fuel buyers on the fuel assemblies that must be ordered, the quantity of enriched Uranium (EUP) and the % level of enrichment required.
Fuel buyers then negotiate contracts with companies that fabricate the fuel assemblies, usually ordered 2 to 3 years or more prior to when they will be loaded into reactors.
With orders for fuel assemblies now in the factory queue, buyers negotiate contracts with companies that provide uranium enrichment services based on the unique specifications for each individual reactor.
The enricher & fuel buyer decide on the tails assay that will be used in the enrichment contract, which determines the amount of SWU that will be charged and the quantity of unenriched UF6 that the fuel buyer must supply as part of the contract.
The busier the enrichment plant is, the higher the tails assay... the higher the tails assay, the higher the quantity of UF6 that must be supplied. 
Once buyers have their enrichment contracts in place they can proceed to order the required unenriched UF6 that must be obtained either by direct purchase from commercial inventories (hint: inventories are depleted) or by negotiating contracts with companies that provide Conversion services that convert mined yellow cake #U3O8 into unenriched UF6. The conversion providers specify how much mined #U3O8 the buyer must ship to the conversion plant that will be fed into the conversion process to fulfill the contract requirements. 
Finally, now that the reactor fuel buyers know the exact quantities of #U3O8 that they must deliver to the Conversion facility - for western fuel buyers that's Cameco in Canada, ConverDyn in the USA, Orano in France - they can now negotiate contracts with suppliers/miners for the required quantities, delivery date and location.
This is the final step in the fuel cycle contracts chain, left to the last because the quantities/dates/locations must be determined at the Conversion stage before large U3O8 supply contracts can be signed with suppliers.
In some cases, where only small U3O8 quantities are needed, the fuel buyers will place orders in the Spot market. (That's why you see 3 locations for delivery of Spot market purchases - Cameco, ConverDyn & Orano - as those are the secure storage sites at the associated Conversion plants.)
Got it?
So... this is why the prices for enrichment SWU and Conversion are leading indicators for the demand and price of mined #U3O8.
Demand appears in those stages of the fuel cycle first!
When there is rising demand for enrichment, the price of SWU rises, as does the tails assay and the quantities of UF6 and mined #U3O8 needed to fulfill the enrichment plant's contract book.
Rising Conversion demand pushes up the cost of conversion services, indicating that there is strong and rising demand for UF6 that requires larger quantities of mined yellow cake #U3O8 feedstock to produce.
Note that there can be a significant time lag between when fuel assembly fabrication contracts are signed and #U3O8 supply contract negotiations conclude.
Negotiating contracts at the enrichment, conversion and #U3O8 stages can take months, so the price wave triggered at the enrichment stage may not arrive at the #U3O8 term contracts stage for some time.
As nuclear fuel consultants UxC have noted, there are on the order of an estimated 2.1 Billion lbs of reactor fuel #U3O8 needs out over the next 15 years that have not yet been ordered by fuel buyers.
With mined Uranium production under 150 Million lbs per year at present, with reactors consuming over 180 Million lbs per year, there is already significant upward pressure on term Uranium prices that have hit a new 16-year high.
As that enrichment price wave passes through Conversion and finally arrives at mined #U3O8, Uranium prices will go substantially higher.
With equipment, materials and labour costs rising, far higher prices are now needed in order to incentivize the construction of the required new Uranium mines to fill that supply gap. A long-term contract price of circa $150/lb, a near double from today's $82 level, is what industry consultants are beginning to see as what's needed to bring on full production of that 2.1 Billion lbs of uncovered contract demand to 2040. Cameco just told us that new contracts their negotiating are Spot market referenced with price ceilings of around $130/lb or higher.
However, as we are seeing, mining is hard.
It can take a decade or more to bring new mines into operation. Some mine development projects are hoping to get construction permits this year and next, but even so it will take 3 to 5 years to build their mines & processing plants to get initial production flowing. Another 2+ years are needed to ramp up to full production. Given the shortages of skilled labour... those are best case estimates.
Several new mines that were slated to come online in Niger and elsewhere have been put on ice.
This is the reason why the uranium bull market could run for a decade or more, especially given that the global pivot to Nuclear power is pushing demand far higher than today's 180 Million lbs/year of consumption. Filling today's supply gap could be achieved by the end of this decade IF demand was static and unchanged... but it's soaring!
On top of that, the law banning US imports of Russian uranium that kicked in on August 11th will reduce the availability of cheap Russian EUP for US reactors until the end of 2027 and eliminate it completely from 2028 to 2040.
Other western users are no longer signing contracts with Russia. This is deepening the supply deficit in the West, which is where the global price of Uranium is set based on the gap between Western supply and demand.
Throwing more gasoline on the fire is the incredible move by Tech Giants to embrace #Nuclear power to meet the surging demand for 24/7 #CarbonFree #electricity for the multi-Gigawatt #AI data centers they are now planning to build worldwide. They're entering into deals that will lead to restarting & life-extending existing Nuclear power plants and building dozens of new large conventional Gigawatt-scale reactors and the latest trend - Small Modular Reactors (#SMR's).
All of a sudden, Nuclear utilities will have to come into the Uranium market to order up the necessary fuel assemblies, enrichment SWU, Conversion and then the #U3O8 feedstock to provide the extra new fuel needed to power the #AI revolution.
U can therefore expect to see prices continue to rise across the entire Nuclear Fuel Cycle. I hope this helps U to better understand this unique commodity and the many factors in play today that are together sending signals that even higher Uranium prices are on the way.
IMHO, the price action we've seen so far is just the pre-game warm-up, especially now that Big Tech is going to push this bull run into extra time.
Good luck with your research & investments!
