Weekly Reports | Jun 02 2020
Activity in uranium markets slipped back to more normal levels in May as utilities remain reluctant to commit.
-US uranium purchases up 20% in 2019
-Purchases from non-allies exceeded those from allies
-Utilities still expected to come to the market this year
By Greg Peel
A recent US Department of Energy report into the US uranium market, which at 28% of demand is the world’s largest, continued to point to nuclear energy remaining a fundamental source of baseload power at 20% of electricity production, Canaccord Genuity notes. While the virus has had an impact, capacity is steady at 93%.
Total US purchases of uranium were up 20% year on year in 2019, 90% of which came from offshore. Purchases from Russia (15%) remain below the 20% cap enforced by the Russian Suspension Agreement in 1992, which is due to expire this year, but President Trump’s Nuclear Fuel Working Group has recommended this be extended.
While Canada remained the top supplier to the US in 2019, the combined purchases of uranium from Russia/Kazakhstan/Uzbekistan exceeded those from Canada/Australia/US for the first time, Canaccord reports, and this may be exceeded further in 2020 given shutdowns at Canada’s Cameco operations.
Deliveries of uranium on a spot basis were 22% in 2019, the highest proportion since 2014, indicating, Canaccord suggests, long term supply contracts signed in the wake of Fukushima (2011-15) are beginning to expire. Of those spot purchases, 40% were made not by utilities but by US traders, pushing up monthly volumes to the highest level in two years – a trend that has accelerated in 2020.
This suggests traders are anticipating utilities will need to come to the market more aggressively very soon – a view supported by industry consultant TradeTech. US utility inventories dropped by -3% in 2019, the DoE report notes, to less than three years coverage. With the virus providing greater supply uncertainty, Canaccord expects utilities will become more active in the term market over 2020.
Among the five uranium mining stocks recommended as Speculative Buys by Canaccord, three are Canadian and two are Australian, being Boss Resources ((BOE)) and Vimy Resources ((VMY)).
If utilities are to become more active, they haven’t just yet. TradeTech's mid-term uranium price indicator fell slightly last month due to the drop in activity and less demand for material in the mid-term window. Buyers remain focused on the virus and trade issues and showed little interest in locking in material in May for mid-term delivery, TradeTech reports.
Continuing to weigh on end-user demand are the virus, and the aforementioned pending expiry of the Russian Suspension Agreement, for which an extension decision is yet to be formally made. And just to add to the uncertainty, last week the Trump Administration announced it will terminate three sanction waivers related to Iran's nuclear program.
Waivers to be terminated include those that cover the conversion of Iran's Arak Heavy Water Research Reactor, the provision of enriched uranium for the Tehran Research Reactor, and the transfer of spent or scrap reactor fuel abroad.
Trump tore up President Obama’s prior nuclear deal with Iran early in his administration, and relations haven’t exactly improved in the meantime. However, he was persuaded to provide certain waivers to sanctions placed on countries assisting Iran with regard non-military nuclear pursuits. The thinking was that having foreign eyes inside these operations was more valuable than raising Tehran’s ire further – seen by most as a sensible move, but for a group of aggressive Republicans.
It appears those Republicans have won the argument. One of the countries currently assisting Iran is Russia. While the waivers come with a 60-day wind-down period, were Russia to defy US sanctions then further sanctions would likely be imposed on Russia, which might include the banning of uranium imports.