Uranium Week: Acting For Nuclear

Weekly Reports | Aug 02 2022

The spot uranium price jumped last week after the US Democrats reached an agreement on a bill that includes investment in and tax breaks for zero-carbon energy.

-Democrats agree on climate change bill
-Uranium spot price jumps in response
-Utilities active in term markets

By Greg Peel

Amidst the uncertainty created by the Russian invasion, potential sanctions on Russian uranium and a shift away from Russian exports by US and European utilities, the uranium spot market has been range-bound on low volumes in recent weeks.

The week before last also as good as shut the market down when the Nuclear Energy Institute's Nuclear Fuel Supply Forum drew market participants to Washington DC.

Last week began the same way, as participants awaited a June quarter earnings result from major producer Cameco, and awaited the Fed’s decision on interest rates.

What was not anticipated last week was news that broke on Wednesday that US Senate Majority Leader Chuck Schumer and recalcitrant Democrat Senator Joe Manchin had announced a deal on an energy and health care bill, representing a breakthrough after more than a year of negotiations.

The Inflation Reduction Act has been born from the ruins of Biden’s earlier grand Build Back Better bill, which seemed like a good idea at the time of his election as the US tried to move out of covid, but has since become politically toxic as an additional driver of runaway inflation.

Hence the name. The Inflation Reduction Act is viewed as a significant achievement for the US nuclear industry, industry consultant TradeTech notes, if it becomes law. The measure would invest US$369bn into energy and climate change programs, with the goal of reducing carbon emissions by -40% by 2030.

Clean energy tax credits would drive the majority of those emission reductions, including a production tax credit for existing nuclear power plants and a tax credit for investment in new zero-carbon electricity facilities, including nuclear power plants.

This news, as well as a positive result from major producer Cameco, spurred the spot market into action on the day and TradeTech reports five spot transactions concluded totalling 500,000lbs U3O8, sending TradeTech’s weekly spot price indicator up US$3.00 to US$48.75/lb.

That end-July price was down -US$1.75/lb from the end-June price. It was a thin month of trading, with only 2mlbs U3O8 changing hands in 17 transactions, TradeTech reports.

Term Markets

Although utilities have decided to forego participation in the spot uranium market, they remain extremely active in realigning their portfolios to mitigate potential exposure in the event of a Russian-related disruption, TradeTech reports.

These efforts have been primarily focused on addressing enrichment and conversion needs, but the market is now seeing utilities venturing into addressing long term uranium needs as well.

That said, only two transactions were concluded in July for term delivery of approximately 1mlbs U3O8 for delivery beginning this year and extending into 2029. But five off-market transactions that have been under negotiation for several months were finally concluded and account for delivery of over 10mlbs to occur over a range of time periods, with some extending until 2030.

Offers are due this week to supply the US Department of Energy with 1mlbs U3O8 for the planned US strategic uranium reserve.

TradeTech’s mid-term price indicator has dipped to US$51.50/lb at end July, down from US$52.00/lb. The long-term price indicator remains at 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 01/08/2022 0.3400 0.00% $0.64 $0.14
BMN 01/08/2022 2.1600 1111.11% $2.29 $0.12
BOE 01/08/2022 2.2700 12.44% $3.10 $0.14 $2.600 14.5%
ERA 01/08/2022 0.2500 4.17% $0.58 $0.16
PDN 01/08/2022 0.7100 7.46% $1.12 $0.42 -76.2 $0.800 12.7%
PEN 01/08/2022 0.1800 5.88% $0.35 $0.12
VMY 01/08/2022 0.1900 0.00% $0.33 $0.09

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