Uranium Week: Taking Advantage

Weekly Reports | May 24 2022

Largely absent from the spot market in 2022, utilities last week decided volatility had led the uranium spot price down far enough.

-Spot uranium price falls again on general market volatility
-Utilities pop their heads up
-Activity in term markets remains buoyant

By Greg Peel

Having all but abandoned a uranium spot market beholden to wider financial market volatility, utilities took advantage of yet another big swoon on markets last week, specifically on Wall Street, which had the spot uranium price tumbling once more.

One might be drawing a long bow to connect earnings results from a US grocery chain and a discount retail chain with the demand/supply fundamentals of the nuclear energy industry, but having been sucked into the black hole of financial speculation, the spot uranium market is now but another financial plaything.

Industry consultant TradeTech’s weekly spot price indicator fell another -US$4.50 to US$45.50/lb last week in transactions totalling 600,000lbs U3O8 equivalent.

While the indicator remains up 46% year on year, it is down -28% since reaching a recent peak of US$63.75/lb in mid-April. While utilities have mostly avoided the volatility of the market in 2022, their need to secure uranium at this time is urgent, so there eventually had to be a spot price sufficiently attractive.

So among the usual traders and financial entities on the buy-side last week, utilities also put their hands up.

As for the financial entities of physical uranium trusts, recent volatility has seen their valuations occasionally drop below the value of the uranium they are holding.

Demand is not the issue

That said, last Friday the shares in physical trust Yellow Cake Plc jumped 5% on news the fund had taken delivery of approximately 2mlbs U3O8 in an option it exercised with Kazatomprom at US$43.25/lb.

Meanwhile, a wild spot market is having little impact on serious utility demand, which is being driven by the uncertainty created by the threat of sanctions on Russian exports, as well as the same supply constraint and cost issues being faced by all industries globally.

The term uranium market remains extremely active, TradeTech notes. Utilities are engaged in off-market discussions with both existing and potential new suppliers around commitments in the mid- to long-term delivery space. Suppliers have been successful in placing additional volume with utilities under existing and new agreements totalling over 2mlbs U3O8 equivalent.

Ongoing discussions are expected to result in similar quantities being committed in the coming weeks.

TradeTech’s term price indicators will be reassessed at the end of the month, but for now remain at US$61.00/lb (mid) and US$52.00/lb (long).

Uranium companies listed on the ASX:

ASX CODE LAST PRICE % MOVE 52WK HIGH 52WK LOW P/E CONSENSUS TARGET UPSIDE/DOWNSIDE
BKY 0.3700 0.00% $0.64 $0.00
BMN 0.2100 0.00% $0.44 $0.00
BOE 2.1400 0.47% $3.10 $0.00 $3.200 49.5%
ERA 0.3100 0.00% $0.58 $0.00
PDN 0.7600 2.70% $1.12 $0.00 -77.5 $1.000 31.6%
PEN 0.1800 0.00% $0.35 $0.00
VMY 0.1900 0.00% $0.33 $0.00

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