Uranium Week: Can Uranium Continue To Outperform Commodities?

Weekly Reports | Sep 29 2020

As the weekly uranium price stabilises, one wealth manager contemplates the way forward for prices.

-Macquarie weighs the impact of uranium mine restarts
-BP considers the role of nuclear energy over time
-Weekly spot prices are unchanged

By Mark Woodruff

Despite the spot price of uranium continuing to deliver one of the top 2020 performances for Macquarie Wealth Management’s coverage of commodities, the broker considers the uranium party is probably over for now.

The spot uranium price had risen 25% year-to-date to US$30.95/lb. However, the price has been sliding since its 20 May peak, mainly on the prospect of a general re-firing of mine supply as industry lockdowns are eased, notes the broker.

The spot price reached the May heights due to a massive collapse in mine supply, part of virus controls worldwide. The various shutdowns dwarfed the corresponding pullback in nuclear power demand.

By way of example, Cameco announced the closure of the world’s largest uranium mine at Cigar Lake. But by July 29, the company reported that the mine would probably restart in September 2020. Elsewhere around the world, the market expects a progressive recovery of mine supply.

However, amidst the suppressed price outlook due to increased supply, Macquarie uncovers two positives. US utilities may need to seek alternative supply options, following the constraint on Russian imports, via amendment to the Russian Suspension Agreement (RSA). Additionally, industry feedback suggests utilities’ inventories were significantly drawn down during lockdowns and they will need to be restocked.

The spot forecast by Macquarie for 2020 is US$30/lb, holding a US$28-35/lb range thereafter. The broker's unchanged long-term price forecast is US$32/lb (real).

Company News

In February, BP (formerly The British Petroleum Company) announced its aim to become a carbon net-zero company by 2050.

The company made its Energy Outlook 2020 edition launch available online this week, as noted by industry consultant TradeTech, with messages from several top executives including Spencer Dale, group chief economist. This Outlook explores three main energy scenarios around the pace and nature of the energy transition. These were rapid, net zero and business-as-usual.

Mr Dale noted that “nuclear power generation more than doubles out to 2050 in [the] rapid [scenario], so it is playing quite a significant role. We have, in terms of capacity, something like 500GW of nuclear capacity built out to 2050 in the rapid scenario. That is really strong growth”.

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