Uranium Week: Urgency Increases

Weekly Reports | Jul 19 2022

Amidst an rising push towards nuclear power in the US, Europe and Asia, ongoing supply uncertainty is dominating uranium term markets.

-Spot price down on general market volatility
-Term market action a different story
-Governments across the globe push for nuclear

By Greg Peel

The news early last week that an exemption had been granted to the Canadian shipper waiting to load Russian enriched uranium product in St Petersburg lifted concerns over an imminent delivery disruption.

This, and another volatile week in financial markets in general following a US inflation print of 9.1%, had spot uranium down -US$1.85 to US$45.75/lb on industry consultant TradeTech’s weekly price indicator. Five transactions totalling 500,000lbs U3O8 equivalent were concluded.

To appreciate what’s going on in the “real” uranium market, we must turn to the term markets, where utilities are active.

Producers face many challenges in meeting future demand expectations on schedule and at prices that will entice utilities to commit to purchases today, TradeTech notes. Producers, while anxious to capture market share and secure contracts, are also looking to capture a return on their investment that takes into account the impact of inflationary pressure on their costs.

Yet, buyers continue to show a willingness to pay higher prices in order to secure uranium conversion supply, TradeTech points out, especially for delivery in the next 24 months.

The looming deficit in future conversion capacity is more pronounced today than it has been in recent history because of the potential for sanctions against Russian nuclear fuel, the extended shutdown of Honeywell's Metropolis Works Facility in the US — one of only three Western uranium converters — and the realisation that deliveries of Russian material may be secure for the moment, but are not guaranteed in the future as the war in Ukraine continues.

This uncertainty has prompted primary suppliers to seek long-term agreements that support not just current operations, but to incentivize additional capacity expansion, in order to shift away from Russian conversion supply.

A Bit Warm

The war and its impact on energy supply is one thing, but the current European heatwave is another. While Europeans are becoming more accustomed to 40 degree days, even the UK, where everyone thinks they’re going to die if the temperature hits 30, is predicted to see such temperatures.

Australians are more than used to runs of 40 degree days, but mercifully have enjoyed two mild summers in a row following the devastating 2019-20 bushfires. Not so Europe. There has been much concern as to how Europe will cope with the coming winter, but the heatwave is already pressuring limited energy supply.

While US utilities are waving the nuclear flag, and the government is buying reserves of uranium, the acceptance of nuclear power in the European “green” taxonomy and the current crisis is leading to a similar nuclear push, and so is the case in Asia.

Last week Belgium’s Energy minister called on the government to consider extending the operation of two nuclear power plant units slated for closure in 2023.

In South Korea, new President Yoon Suk-yeol continues to promote a return to nuclear power in a reversal of former President Moon Jae-in’s nuclear phase-out intentions, revealing plans that include a schedule to resume construction of two more units as early as 2024.

Japanese Prime Minister Fumio Kishida has asked for up to nine of the nation's reactors to be ready for operation before winter as the nation prepares for a possible power shortage.

The push is on.

TradeTech’s term price indicators remain at US$52.00/lb (mid) and US$53.00/lb (long).

Uranium companies listed on the ASX:

ASX CODE DATE LAST PRICE WEEKLY % MOVE 52WK HIGH 52WK LOW P/E CONSENSUS TARGET UPSIDE/DOWNSIDE
BKY 18/07/2022 0.3500 -10.26% $0.64 $0.14
BMN 18/07/2022 0.1900 11.76% $0.44 $0.12
BOE 18/07/2022 1.9700 8.79% $3.10 $0.14 $2.600 32.0%
ERA 18/07/2022 0.2200 4.76% $0.58 $0.16
PDN 18/07/2022 0.6300 12.28% $1.12 $0.42 -64.1 $0.800 27.0%
PEN 18/07/2022 0.1600 0.00% $0.35 $0.12
VMY 18/07/2022 0.1900 11.11% $0.33 $0.09

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