Weekly Reports | Feb 20 2018
Donald Trump’s planned tariffs on steel and aluminium may have repercussions for the US uranium industry.
-US uranium sector awaits whether Trump protectionism measures might include uranium
-US Department of the Interior considering which minerals are critical to national and economic security
-World is watching baseload renewables project in South Australia
By Greg Peel
We recall that two US uranium producers have petitioned the US government to initiate a section 232 review of the Trade Expansion Act of 1962 to protect domestic producers from imports of state-sponsored production (eg Russia, Kazakhstan). US producers would like to see US utilities forced to purchase a minimum 25% of their uranium requirements from local producers.
The petition has ensured the spot uranium market remains in a state of flux, with prices drifting mostly lower, as participants wait to find out just how the US government might respond. And a response could be some time away.
But last week may have provided a clue.
The last time section 232 was applied was in 2001. That is up until last week, when President Trump announced significant tariffs to be placed on imported steel and aluminium. The US steel industry in particular, and the president, have railed against the “dumping” of cheap Chinese steel produced by state-subsidised mills.
The uranium-related petition has been put to the US Department of Commerce but, at the same time, the Department of the Interior is looking to increase domestic mineral production and is currently accepting public comment on a list of 35 minerals considered critical to national and economic security, of which uranium is one.
All points to the uranium petition being positively received on a policy basis but there is a Catch-22. In the current US electricity market it would be uneconomical for utilities to be forced to purchase 25% domestic uranium and many a reactor would be forced to shut down as a result, reducing demand for domestic production and risking the security of the US power supply.
The conundrum is a major reason why the global uranium market remains in a state of uncertainty.
French Connection
French president Emanuel Macron’s election policies included a wind-down of France’s reliance on nuclear power. But not a complete shutdown. Last week Macron said he would not rule out building new reactors to replace ageing plants and he has also slowed his push for nuclear power reduction as he awaits completion of the new Flamanville reactor.
The president is keen to review the studies of the new plant by France’s nuclear regulator.
Might Macron change his tune? This report last week highlighted research from Morgan Stanley that suggested a combination of the shutdown of ageing reactors in key nuclear-powered countries, along with policies of reduced reliance on nuclear power, threatened to leave those countries unable to meet their emission reduction targets as agreed to in the Paris Accord.
To that end, Morgan Stanley also reports European utilities are closely watching developments in South Australia.
Renewable Watch
South Australia made headlines around the globe in 2016 when the entire state was blacked out in a violent storm. The blackout highlighted the inefficiencies of the state’s electricity system and reliance on neighbouring states for baseload power at critical times.
The state government has responded by taking up Tesla’s offer of assistance. A network of 50,000 solar powered, battery-stored systems is to be constructed across the state. It is arguably the world’s first big test for renewable energy as a source of secure baseload power. And the world is watching.
Outside of gas-fired power, the greatest threat to the US nuclear power industry is subsidised renewable energy. Renewable energy is only now beginning to make its mark in terms of scale and economic viability.
And the irony is that South Australia’s uranium deposits are among the most extensive in the world. Yet there has never been, and nor are there any plans for, a nuclear power plant in Australia.
Tepid Bounce
After ten weeks without an uptick, industry consultant TradeTech’s weekly uranium spot price indicator rose US40c last week to US$21.90/lb as new demand emerged from utilities and intermediaries. Volume was light at 500,000lbs U3O8 equivalent in four transactions, however one utility entered the market seeking in excess of one million pounds for delivery over the course of 2018.
Activity also picked up in term markets, with several transactions recorded for deliveries in the 2019-22 window.
TradeTech’s term price indicators remain at US$26.00/lb (mid) and US$30.00/lb (long).
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