Uranium Week: All About Russia

Weekly Reports | Oct 25 2022

The will they, won’t they question of whether Russian uranium exports will be banned by the West continues to hang over the uranium market, as spot interest picks up once more.

-Russian bans to inform uranium pricing
-US Congress moving in that direction
-Spot market interest returning despite ongoing financial market volatility

By Greg Peel

Citi sees a number of factors making the nuclear energy outlook optimistic for the coming years/decades, as countries around the world are realising the importance of having a secure source of energy, with nuclear energy being one of the preferred sources for clean energy, energy independence and security.

While most utilities prefer using enriched uranium for fuelling reactors, yellowcake – U308 – can also be used with certain tails assay once converted, Citi notes. Conversion prices have reached record highs in recent months as utilities in Western Europe and North America have been preparing for potential disruption to Russian supplies of enriched uranium.

Citi’s uranium price bull case assumes the US, the UK, the EU and countries in Asia will introduce bans on Russian uranium supplies starting in 2023, based on publicly available information on ongoing discussions in the US Congress and the European Parliament.

In addition, any Russian-related projects would likely be halted in Eastern Europe, including reactor construction in Hungary, Slovakia and Turkey, Citi suggests.

Under this scenario, uranium production in Kazakhstan with Russian state-owned shares would also likely be banned from Western markets. Such an embargo would create a shortage of enriched products and add even further tightness in the conversion market in the short term, and provide a bid to the U3O8 price.

Citi ascribes a 25% probability of such a scenario and possibly more in the event of escalation of the Russia/Ukraine conflict.

Citi’s base case is for a gradual phase-out of Russian supplies, and also accounts for a more manageable slowing of the Western economies, not having a larger impact on electricity consumption. The base case scenario has the highest probability (60%) among the three scenarios that are considered.

The bear case is for no bans (15%).

Renewed Interest

The S&P500 closed higher last week after another period of volatility which concluded with a big rally on the Friday. With uranium having become more of a financial asset than a commodity in the past couple of years as far as the spot market is concerned, Wall Street has become a proxy for spot price movement.

When financial markets have become particularly volatile this year, financially-motivated uranium buyers have moved to the sidelines. But despite last week seeing ever more volatility, buying interest in the spot market opened the week to the upside and just kept going. By week’s end a 5% spot price increase matched a 5% increase the week before.

More than 1.3mlbs U3O8 traded hands in 13 transactions reported for the week.

Industry consultant TradeTech’s weekly spot price indicator is up US$2.50 at US$52.75/lb. The indicator is up 15% year to date.

Not Quite a Ban

While the US and/or EU are yet to formally ban imports of Russian enriched uranium, moves are nevertheless afoot in that direction. Earlier this month, legislation was introduced to the US Congress that would make future deliveries of Russian material to the US more difficult, TradeTech reports.

An amendment to the National Defense Authorization Act was proposed by three US senators – one Democrat and two Republicans. The amendment includes the "US Nuclear Fuels Security Initiative to Reduce Reliance on Nuclear Fuels from Russia and China," which aims to reduce the reliance of the US and its allies on the Russian Federation for "energy fuels, including all forms of uranium”.

Several utilities have indicated they will be entering the uranium market in coming weeks through both formal channels and "off-market" discussions with suppliers, TradeTech reports.

TradeTech’s term price indicators remain at US$50.50/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 24/10/2022 0.2700 0.00% $0.64 $0.14
BMN 24/10/2022 2.0900 0.99% $2.49 $0.15
BOE 24/10/2022 2.6400 0.75% $3.10 $0.27 $3.300 25.0%
DYL 24/10/2022 0.8300 2.47% $1.25 $0.55
ERA 24/10/2022 0.2150 – 2.27% $0.44 $0.16
LOT 24/10/2022 0.2250 – 2.17% $0.46 $0.19
PDN 24/10/2022 0.8500 6.25% $1.03 $0.53 -148.4 $1.100 29.4%
PEN 24/10/2022 0.1650 – 2.94% $0.31 $0.14
SLX 24/10/2022 2.9000 – 3.33% $4.14 $0.99

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