Weekly Reports | Apr 07 2021
As the uranium prices continue to rally, Morgan Stanley expects inventories to diminish and prices to trend higher
-Morgan Stanley forecasts US$48/lb by 2024.
-Disposal of uranium waste deemed safe
-Spot uranium price climbs nearly 13% in March
The pandemic has been a greater disruption to uranium supply than to demand, with nuclear power proving to be very resilient in most markets. Nonetheless, sales from inventories have capped price upside. As inventories diminish, Morgan Stanley expects the uranium price to trend higher.
Increased contracting activity in the enrichment market could be the start of a new long-term uranium contracting cycle. While global nuclear power capacity fell -2.7GW in 2020, Morgan Stanley sees a net 8GW increase in 2021 as new plants come online in China, other Asia and Eastern Europe.
Meanwhile, in the recent 14th five-year plan, China is targeting 70GW of nuclear capacity by 2025 from 48GW in 2020. In Europe, an expert panel will recommend that the EU should designate nuclear power as a green investment, which would clearly be a positive for the industry's long-term future.
Based on a bottom-up plant model, Morgan Stanley sees nuclear power capacity growing at a 1.7% compound annual growth rate (CAGR) until 2026, followed by a pick-up to a 2.5% CAGR over 2026-30.
The analysts forecast total mine supply to increase 10% or by 11.4mlbs to 131mlbs in 2021, still -6% short of 2019 levels.
An restart of Cameco’s Cigar Lake mine remains uncertain, given covid cases in Saskatchewan have been rising since mid-March. Meanwhile, two other mines have closed indefinitely in the first quarter 2021. Australia's 3.5mlbs Ranger mine, owned by Energy Resources of Australia ((ERA)), which is in turn owned two-thrids by Rio Tinto ((RIO)), ended production in January, while Niger's 2.6mlbs Cominak mine shut on 31 March.
In addition, last week French group Orano ceased production at its Akouta Mine in Niger. The mine, operated by COMINAK (the national uranium mining company of Niger), operated for 40 years and 195mlbs were extracted.
Although leading producer Kazatomprom aims to lift 2021 output by 16% or 7.8mlbs from covid-impaired 2020, the comany says it will maintain supply discipline by keeping production -20% below capacity.
With the market deficit being structural in the long run, higher prices are required for Cameco to bring its idled 20mlbs MacArthur operation back, Kazatomprom to produce at full capacity, and to incentivise investment in new projects. Therefore, Morgan Stanley forecasts the spot price to climb to US$48/lb by 2024.
In significant sector news, a comprehensive assessment conducted by the European Commission’s Joint Research Centre (JRC) highlights nuclear energy does no more harm to human health or the environment than any other power-producing technology considered to be sustainable.
The JRC stated “there is broad scientific and technical consensus that disposal of high-level, long-lived radioactive waste in deep geologic formations is, at the state of today’s knowledge, considered as an appropriate and safe means of isolating it from the biosphere for very long time scales.”
This is important because at present nuclear has been neither included nor excluded from the Taxonomy (scheme of classification) due to the former Technical Expert Group's (TEG) recommendation that nuclear be assessed by experts with an in-depth knowledge of the nuclear life cycle. An important issue identified by the TEG was waste disposal and the lack of a long-term solution.
In response to the JRC's assessment of nuclear, Foratom, the European nuclear trade organisation, said that the European Commission should move ahead with the inclusion of nuclear under the Sustainable Finance Taxonomy and the Ecolabel for Retail Financial Products.
Uranium Pricing-During the week
In a shortened week due to the Easter break, TradeTech’s weekly spot price index rose US60c to US$31.10/lb last week.