Weekly Reports | Oct 16 2018
Another uranium investment company moves to list while the IPCC highlights nuclear power as a way to meet Paris Agreement goals.
-Another uranium investment company launches IPO
-IPCC recommends nuclear power
-Spot market volumes breaking records in 2018
By Greg Peel
Big news in Australia last week, and no doubt around the globe, was the release of a Special Report on Global Warming of 1.5°C by the Intergovernmental Panel on Climate Change (IPCC), referring to the goal of the Paris Agreement to cap global warming at that level.
An increase of 1.5° would be bad enough, the IPCC warned, 2.0° would be catastrophic.
The report was particularly relevant for Australia, being one of the world’s largest exporters of coal, with a government maintaining a preference for cheap coal-powered energy, and boasting the largest reserves of uranium while shunning any notion of nuclear power. A significant increase of nuclear power, said the IPCC, would help keep global warming to 1.5°.
The IPCC report will inform the Katowice Climate Change Conference in Poland in December, at which governments will review Paris Agreement progress.
The International Energy Agency (note, not the International Atomic Energy Agency) also last week delivered a warning to Switzerland, suggesting the country’s decision to phase out nuclear power would lead to a “considerable energy sector transition in coming decades” and that “filling the gap left by nuclear power station closures while maintaining low carbon generation and high standards of supply security will be challenging”.
One way to reduce carbon emissions is to phase out internal combustion powered vehicles, which is already underway across the globe but not in Australia, and replace them with electric vehicles. But the greater the take-up of EVs, the greater the demand for electricity generation. No point in meeting that demand with coal-fired power, from an emission reduction stand point.
Indeed, experts have suggested there is only one viable solution to achieving the transition to EVs, and that’s increased nuclear power.
The Smart Money?
The newly formed Uranium Trading Corporation has launched an IPO of US$58m in ordinary shares and applied for listing on the New York Stock Exchange. The UTC plans to invest in the uranium industry, but specifically to direct 85% of funds raised to purchase U3O8.
The IPO follows last year’s listing of a pioneer in the uranium investment field on the London Stock Exchange’s Alternative Investment Market (AIM), called Yellow Cake plc. Yellow Cake, too, has acquired large amounts of U3O8, mostly from Kazakhstan.
Why has uranium suddenly become of great interest to investors – long term investors, not short term speculators? The answer might be “see above”.
These new players in the global uranium market are one reason the spot uranium price has been on the rise in past months, indeed up 33% year on year. While utilities – actual end-users – will always dominate the demand side, they have been slow to move on historically low prices given sufficient inventories for the time being.
The other reason the price has been rising is the supply-side influence. With spot prices falling below the cost of production, producers with longer term delivery contract obligations decided to shut down their own production and fulfill obligations by simply buying in material at spot. If 2018 has been notable for anything in the uranium industry, it is the fact producers have been net buyers, not sellers, as they clearly should be.
Which begs the question, who’s selling? And how long can they keep doing so?
Assuming all of the above leads to higher uranium prices, eventually mines that are currently non-commercial will come back on line and the equation will rebalance. That time is not next week.
The new world – as far as the uranium market is concerned – of longer term financial investors and producers on the wrong side of the bid-ask spread pushing up prices has led to year to date spot volumes to 50.2mlbs U3O8 equivalent, which is already higher than the previous annual record of 45.1mlbs set in 2015, industry consultant TradeTech reports.
Last week saw 1.1mlbs change hands with little movement in price. TradeTech’s weekly spot price indicator has fallen -US10c to US$27.55/lb.
TradeTech’s term market indicators remain at US$30.00/lb (mid) and $32.00/lb (long).
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