Uranium Week: Volatility And Uncertainty

Weekly Reports | May 03 2022

General financial market volatility continues to impact on the spot uranium market as utilities concentrate on securing term market supply.

-Financial markets remain volatile
-Uranium stocks swept up in sell-offs
-Utilities careful in securing supply amidst uncertainty

By Greg Peel

The spot uranium market continues to be drawn into the gravitation pull of financial markets in general, which are currently undergoing extensive volatility, now being seen as much as a financial investment product as a physical commodity.

This is most evident in the impact on the share prices of uranium producers, industry consultant TradeTech notes, which have continued to be sold down in line with equity markets as a whole. The uranium price now exhibits greater sensitivity to trends and developments that impact investor sentiment consistent with other commodities.

The escalating war in Ukraine has further created concern about possible Russian export sanctions and the uncertainty of future nuclear fuel deliveries being made. In addition, transportation and insurance surrounding delivery of nuclear fuel is growing increasingly costly.

Spot market activity was particularly slow last week, as is typically the case when market participants attend one of the many annual nuclear industry forums – in this case the World Nuclear Fuel Cycle 2022 forum in London. There major producers such as Cameco and Kazatomprom addressed the above uncertainties the market is facing.

Only three transactions were concluded in the spot market last week, totalling 300,000lbs U3O8 equivalent. TradeTech’s weekly spot price indicator fell -US50c to US$53.00/lb.

In contrast to supply-side issues, promising developments on the demand front continue to emerge almost daily, TradeTech reports. Last week the State of California said it would seek federal government funding to support extended operation of the Diablo Canyon Nuclear Power Plant, where two units are scheduled for closure in 2024 and 2025.

Meanwhile, escalation of the war, and now Germany’s agreement to ban Russian oil exports to the EU, suggest sanctions on Russian uranium exports may not be far away.

For the Month

A total of 40 spot transactions representing 4.7mlbs U3O8 were concluded over the course of April. Prices in the first half of the month reached a high of US$63.75/lb, however, as inflation fears gripped and global financial markets fell, investment into the Sprott Physical Uranium Trust stalled, resulting in less buying by the fund in the second half of the month.

Utilities have all but abandoned the spot market due to the volatility, choosing to secure supply amidst uncertainty in the uranium terms markets. April saw five transactions totalling 5mlbs U3O8 across mid- and long-term delivery windows.

But utilities are not barrelling in willy-nilly. They are continuing to take a moderated approach, TradeTech reports, strongly vetting potential suppliers based not only on the base price but an evaluated price that includes an exhaustive consideration of factors such as jurisdictional risk and ESG compliance, as well as the supplier’s ability to deliver material on time, along with terms and conditions related to escalation and quantity flexibility.

TradeTech’s spot price indicator fell -US$5.20 over the month to US$53.00/lb.

The consultant’s mid-term price indicator has risen to US$61.00/lb from US$58.00/lb at end-March, and the long-term price indicator to US$52.00/lb from US$50.00/lb.

Uranium companies listed on the ASX:

ASX CODE LAST PRICE % MOVE 52WK HIGH 52WK LOW P/E CONSENSUS TARGET UPSIDE/DOWNSIDE
BKY 0.4200 0.00% $0.64 $0.00
BMN 0.2300 0.00% $0.44 $0.00
BOE 2.5700 1.18% $3.10 $0.00
ERA 0.3200 0.00% $0.58 $0.00
PDN 0.7900 0.00% $1.12 $0.00 -84.2 $1.000 26.6%
PEN 0.2300 0.00% $0.35 $0.00
VMY 0.2400 0.00% $0.33 $0.00 $0.210 -12.5%

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