Uranium Week: First Hit On Russia

Weekly Reports | Jun 28 2022

Sellers abruptly backed off offers in the spot uranium market last week when Canada banned a shipment from Russia.

-Contracted uranium delivery stopped in St Petersburg
-Sellers immediately withdraw spot offers
-Legislative sanctions now a reality

By Greg Peel

The spot uranium market was quiet last week, industry consultant TradeTech notes, with only six transactions totalling 600,000lbs U3O8 equivalent reported. There was no utility involvement.

Activity was stopped dead on Friday when news came through that following the Canadian government’s recent amendment to Special Economic Measures on Russia, a cargo of enriched uranium product scheduled for delivery to the US via a Canadian shipping company had been delayed at the port of St Petersburg.

Given utilities buy uranium on term contracts they have been contractually bound to continue to take delivery of Russian uranium on deals signed before the invasion despite any reluctance to do so. But the amended Canadian regulation states there is "no wind-down period and no exceptions, such as for contracts entered into prior to the introduction of the prohibition. The prohibition takes effect as of the date on which the regulations were registered, which was June 7th."

By Friday afternoon, sellers had withdrawn from the spot market or raised their offer prices significantly, TradeTech reports. There remained one buyer showing a firm bid of US$47.75/lb U3O8 that went unfilled. TradeTech’s weekly spot price indicator thus closed the week at US$47.75/lb, up US$2.25 from the prior week.

TradeTech’s term price indicators remain at US$51.00/lb (mid) and US$52.00/lb (long).

While the market has been on high alert for legal or legislative action within the US that could potentially lead to disruption of deliveries from Russia, it is this unexpected move by the Canadian government that has resulted in a potential delay in delivery of nuclear fuel to US utilities, TradeTech notes.

As the war in Ukraine continues, the possibility that legal or legislative sanctions could be imposed at any moment by other parties that impacts timely deliveries of enriched uranium product is no longer a theoretical possibility, but reality.

The Bigger Picture

The global push for energy independence following Russia’s invasion of Ukraine has provided a tailwind for uranium expectations, notes Canada’s BMO Capital Markets, as nuclear build-outs are back in vogue. The role of uranium, and wider nuclear technology, in a low-carbon global economy is becoming ever clearer and is driving significant research and development into the next generation of technologies, just as happened with solar power around 2010.

Given this pathway, BMO believes the uranium price will ultimately have to rise to necessary levels to stimulate the increased production required to match growing demand needs, hence an increase to a forecast long-term price to US$58/lb, up from US$50/lb.

Furthermore, government strategy in the US, potential Chinese exports of the Hualong reactor technology and development of small modular reactors (SMRs) all have potential to see demand surprise on the upside relative to BMO’s base case.

Uranium companies listed on the ASX:

ASX CODE DATE LAST PRICE WEEKLY % MOVE 52WK HIGH 52WK LOW P/E CONSENSUS TARGET UPSIDE/DOWNSIDE
BKY 27/06/2022 0.3500 2.94% $0.64 $0.14
BMN 27/06/2022 0.1900 11.76% $0.44 $0.12
BOE 27/06/2022 1.8700 1.10% $3.10 $0.14 $2.600 39.0%
ERA 27/06/2022 0.1700 -38.46% $0.58 $0.16
PDN 27/06/2022 0.6200 1.64% $1.12 $0.41 -63.3 $0.800 29.0%
PEN 27/06/2022 0.1700 0.00% $0.35 $0.12
VMY 27/06/2022 0.1800 12.50% $0.33 $0.09

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