Weekly Reports | Mar 15 2022
The prospect of sanctions on Russian nuclear fuel exports has buyers piling into spot and term uranium markets, leading to a 16% weekly price jump.
-Spot uranium price up 16% on heavy volume
-Sanction uncertainty driving prices
-Utilities looking to term market security
By Greg Peel
Industry consultant TradeTech’s weekly uranium spot price indicator jumped 16% last week, by US$8.25 to US$58.50/lb, to mark the fifth biggest weekly percentage move in the indicator’s history. The spot price is up 35% in a month and 114% year on year.
Volume in the spot market was heavy last week, with 2.3mlbs U3O8 equivalent changing hands.
The US and its allies are yet to specifically target Russian exports of uranium and enriched uranium for direct sanctions (Russia is the world’s largest exporter of enriched uranium), although the White House is said to be assessing sanctions on Russia’s state-owned Rosatom, a major global supplier of fuel and technology.
The uranium market is nonetheless considering sanctions with a view of “it’s only a matter of time”. Or if not, there’s no point in being foolishly optimistic. There is also the issue of the knock-on effect of wider economic sanctions.
Europe has not banned Russian oil & gas exports but sanctions imposed on Russia’s financial system, particularly removing banks from SWIFT, is making payment for exports difficult, resulting in export sanctions by any other name. The same may be true for nuclear exports.
As a result, notes TradeTech, many utilities have been actively taking risk mitigating actions for weeks to ensure that they are insulated from any potential sanctions or delivery disruptions due to supply chain logistics.
For some utilities, this means relying on existing inventories and contractual commitments, but several utilities have also entered into discussions with suppliers about additional purchases.
Financial speculators are subsequently having a field day. The war has been manna from heaven for the Sprott Physical Uranium Trust, which never bought uranium in expectation of an invasion, rather an expectation of nuclear energy being an important element in the “greening” of the global economy.
Financial entities and traders were the primary buyers in the spot market last week.
Term Markets
As is typically the case, utilities are eschewing the volatile spot market and concentrating on securing supply in the term markets.
The uncertain political and legal framework that shapes nuclear fuel trading has led several utilities to accelerate their discussions with suppliers, notes TradeTech.
The long-term contracting framework surrounding nuclear fuel purchases means, however, that utilities are looking at alternatives, which would provide additional flexibility should the conflicts and trade uncertainty surrounding Russian nuclear fuel supply persist. Even if no sanctions are ever imposed, utilities must plan for the unexpected — whether that comes in the form of transportation, corporate, or banking policies in order to ensure that material arrives in a timely fashion at a reasonable cost.
In addition to looking at mid-term deliveries, utilities are expanding their delivery horizon with a number of contracts calling for deliveries in the longer-term period and some extending beyond the 2031 delivery window, TradeTech reports.
While only two transactions were concluded in term markets last week, several utilities are seeking offers for a range of volumes and time horizons.
TradeTech’s monthly term price indicators sit at US$47.00lb (mid) and US$45.25/lb (long).
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