Uranium Week: Demand Growing

Weekly Reports | Sep 13 2022

This story features PALADIN ENERGY LIMITED, and other companies. For more info SHARE ANALYSIS: PDN

The uranium spot price remained unchanged last week but in the longer term, global demand for uranium is steadily growing.

-Countries across the globe move to reactor restarts, new builds, and a rethink of shutting down legacy reactors
-Uranium demand increase will outstrip supply
-Spot price unchanged last week

By Greg Peel

A ramp-up in global uranium demand is expected, Macquarie notes, given recent news that Japan has ordered the development of new nuclear reactors, and 17 existing reactors to be reactivated, France has stated its nuclear generation will be at full capacity by the winter, and Germany also appears to be rethinking reactor decommissioning in light of energy security.

Industry consultant TradeTech notes that in South Korea, President Yoon Suk Yeol is positioning nuclear power to overtake coal as the main source of electricity in an effort to meet the country's climate targets. The new administration has proposed that nuclear account for about one-third of total generation, while pledging to be a major exporter of nuclear power and technology.

In the EU, Poland is advancing plans for its first nuclear power plant while Belgium will extend the operating lives of two plants, and French President Emmanuel Macron remains committed to building new reactors.

Macquarie's demand forecast is now exceeding its supply forecast over the longer term. In response, the broker has lifted its uranium spot price forecasts by 17% for FY24 and 21% for FY25 and lifted its long term price forecasts to US$60/lb from US$55/lb.

Macquarie further acknowledges spot price discovery is being driven by physical purchases from "non-consuming market entities", referring to the Sprott Physical Uranium Trust among others, that global decarbonisation and electrification has brought uranium back to the energy mix globally, energy security is now a key global concern and there is a bifurcation of markets across geographies based on supply security (ie, not Russia).

Macquarie believes that while the recent uranium rally has allowed for project restarts to be approved, a further step-up in pricing is needed to incentivise additional new supply.

The implication is before this comes to pass, there will be a deficit of supply to meet demand.

Last Week

While 800,000lbs U3O8 equivalent changed hands in the uranium spot market last week, TradeTech's weekly spot price indicator remained unchanged at US$52.00/lb.

In term markets, activity remains largely confined to off-market transactions or transactions involving uranium contained in enriched uranium product (EUP).

TradeTech's term price indicators remain at US$52.50/lb (mid) and US$53.00/lb (long).

Australian Miners

In the wake of Macquarie's upgraded uranium price forecasts, the broker has lifted its forecasts and target prices for Australian-listed miners under coverage.

Both Paladin Energy ((PDN)) and Boss Energy ((BOE)) are preparing mines for restarts which, Macquarie notes, are fully licensed in known uranium jurisdictions and have a near-term path to market buoyed by a positive uranium outlook.

Paladin Energy, which is preparing the Langer Heinrich mine in Namibia for restart, sees earnings forecasts rise 25%, 34% and 12% across FY24-26 and target price by 22% to $1.10.

Boss Energy, which is preparing the Honeymoon mine in South Australia for restart, sees earnings forecasts rise 7%, 36% and 12% across FY24-26 and target price by 27% to $3.30.

Macquarie rates both as Outperform.

Uranium companies listed on the ASX:

ASX CODE DATE LAST PRICE WEEKLY % MOVE 52WK HIGH 52WK LOW P/E CONSENSUS TARGET UPSIDE/DOWNSIDE
BKY 09/09/2022 0.3500 6.25% $0.64 $0.14
BMN 09/09/2022 2.2900 4.15% $2.49 $0.15
BOE 09/09/2022 2.9300 11.15% $3.10 $0.23 $3.300 12.6%
ERA 09/09/2022 0.2600 0.00% $0.50 $0.16
LOT 09/09/2022 0.2700 12.50% $0.46 $0.19
PDN 09/09/2022 0.9400 10.71% $1.12 $0.53 -166.7 $1.100 17.0%
PEN 09/09/2022 0.2000 11.11% $0.35 $0.14

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