Weekly Reports | Jun 10 2020
Utilities remain absent in the uranium market ahead of any news regarding the soon to expire Russian Suspension Agreement, and it's not hard to see why.
-Russian production of uranium down minimally compared to US
-Sales from Kazak mines up 17% yoy
-RSA expiry impacting on demand
Let's review some data from recent Uranium Week reports:
The US Energy Information Agency reported US production for the March quarter of 2020 down -79% from the December quarter of 2019 and -86% lower than the first quarter of last year.
Last week Uranium One, the mining division of Russia's state nuclear entity Rosatom, reported production down -9% in the March quarter from the December quarter and -4% from a year ago.
Uranium One also operates in Kazakhstan, and those mines reported a -37% drop in sales in March from December but a 17% increase year on year. Where did it all go?
At 28%, the US is the largest consumer of global uranium production, and two weeks ago the Department of Energy reported a 20% increase in US purchases year on year in 2019, 90% from offshore.
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 Genuity reported, and this may be exceeded further in 2020 given shutdowns at Canada's Cameco operations.
Note that virus-related shutdowns only began very late in the March quarter, if not in the June quarter, on top of prior shutdowns related simply to the low uranium price.
Uncertainty
It is of little wonder the global uranium market is currently concerned that the Russian Suspension Agreement expires at the end of this year. The RSA puts an "anti-dumping" cap on Russian uranium sales to the US of 20% of total. But that's just Russia. Russian sales to the US in 2019 were only 15% of total, but as noted, combined former-soviet sales exceeded allied sales, if you will.
It is also not difficult to understand why, two years ago, US uranium producers petitioned the government to enforce an obligation on US utilities to purchase 25% of requirements domestically. The government instead has budgeted to purchase uranium itself, for the US Strategic Reserve, overcoming the issue of US utilities simply not being able to afford more expensive domestic uranium.
However, that budget is yet to be passed in Congress, and given there's a lot going on at the moment on the fiscal side of things, there is no indication yet of when, or even if, the purchase plan will be ratified.
Throw in the expiry of waivers of US sanctions on Iran, which allowed foreigners (including Russia) to assist Tehran with its (peaceful) nuclear objectives, and it is also not difficult to understand why the global nuclear power industry remains in a state of uncertainty.
As a reflection, activity in the spot uranium market came to a standstill last week, with two off-market transactions leading industry consultant TradeTech to lower its weekly spot price indicator by -US45c to US$33.40/lb. Utilities remain as good as absent from the market.
TradeTech's term market indicators remain at US$37.50/lb (mid) and US$39.00/lb (long).
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