Uranium Week: Fossil Versus Green

Weekly Reports | Jul 05 2022

Action from the US Supreme Court last week has sent shock waves through the US green energy markets, while utilities are now even more urgently seeking secure supply.

-SCOTUS rules in favour of US fossil fuels
-US government begins to build strategic uranium reserve
-Stranded Canadian ship still causing angst

By Greg Peel

The US Supreme Court last week ruled that the US Congress did not give environmental regulators broad authority to author regulations aimed at utilities and their carbon emissions. The ruling is expected to have far-reaching impacts on government regulatory bodies, uranium industry consultant TradeTech suggests, and their authority to combat climate change by forcing a shift from coal to other forms of energy production through US state-level emissions reduction targets.

The Court's conservative majority agreed the US Environmental Protection Agency had overstepped its authority in enforcing its Obama-era environmental regulations, and that Congress is the rightful body to incept and authorize such regulations. While the specific case in question targeted former President Obama's already-repealed Clean Power Plan, last week's ruling sent shock waves through both the environmental and power generation lobbies, TradeTech notes, as it more narrowly defines the EPA's authority.

On the flipside, several agreements have recently emerged in support of nuclear power, including a wide-reaching joint statement made by several pro-nuclear groups at the recent G7 summit that began in Germany.

However, proposed reactor builds will depend not only on supportive finance rules, such as the EU’s green investment taxonomy, but also on supportive pricing structures in electricity markets, such as those developing in the US, TradeTech notes.

Unregulated electricity markets have put nuclear power at a unique disadvantage and led to several premature plant closures. This is a choice rather than an inevitability.

The Matter of Supply

Last week the US Department of Energy issued Requests for Proposals for the sale of up to 1mlbs U3O8 for the purpose of the government’s intention to build a strategic uranium reserve. Individual awards will range from 100,000 to 50,000lbs U3O8, and must come only from US domestic producers.

While that’s good news for US producers, it comes at a time when utilities across the globe are urgently trying to secure their own uranium supplies as the fallout from Russia’s invasion continues.

As reported last week, the Canadian government’s new laws regarding dealings with Russia have led to a Canadian-owned cargo ship at the port of St Petersburg being unable to load up with previously contracted uranium bound for US utilities, lest it be in breach of the law. The nuclear power industry has feared such government intervention would soon emerge, despite US sanctions not (yet) being forthcoming.

The Russian and US parties are considering alternative solutions to delivering the contracted cargo, such as chartering another vessel, which would come at a much higher cost, or asking the Canadian government for an exemption in this one case.

It would likely be the final case involving a Canadian-owned vessel, and has only served to heighten urgency among utilities to find alternative, and secure, sources of uranium. Buyers across all regions have begun making commitments to encourage emerging suppliers and those with mining projects in care & maintenance to enter production.

Price Impact

The Canadian episode has resulted in sellers backing off their offer prices in the volatile spot market, as it appears already contracted uranium supply from Russia is at risk, let alone there being no interest in new contracts with Russia.

TradeTech’s weekly spot price indicator last week rose US$2.75 to US$50.50/lb.

In the term uranium market, five transactions were reported in the month of June calling for delivery of material in the mid-term period. In addition, a number of utilities continue to pursue other means to hedge their portfolios against potential supply interruption of deliveries from Russia, including exercising options and upward quantity flexibility.

TradeTech’s mid-term price indicator has risen US$1.00 from end-May to US$52.00/lb, and the same move is seen in the long-term price to US$53.00/lb.

Uranium companies listed on the ASX:

ASX CODE DATE LAST PRICE WEEKLY % MOVE 52WK HIGH 52WK LOW P/E CONSENSUS TARGET UPSIDE/DOWNSIDE
BKY 04/07/2022 0.3500 0.00% $0.64 $0.14
BMN 04/07/2022 0.1900 – 5.26% $0.44 $0.12
BOE 04/07/2022 1.8800 – 7.77% $3.10 $0.14 $2.600 38.3%
ERA 04/07/2022 0.2100 10.53% $0.58 $0.16
PDN 04/07/2022 0.5900 – 9.52% $1.12 $0.41 -61.1 $0.800 35.6%
PEN 04/07/2022 0.1700 0.00% $0.35 $0.12
VMY 04/07/2022 0.1900 0.00% $0.33 $0.09

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