Weekly Reports | May 30 2023
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While the uranium spot price rose last week, volumes remain weak despite legislative threats to supply.
-Uranium price up, volume weak
-US moves closer to banning Russian uranium
-Bell Potter anticipates a new uranium price cycle
By Greg Peel
Two US bills made it through relevant committees last week, ready to go to votes in the House – one banning the import of Russian uranium from 2028, unless it’s needed, and the other incentivising domestic uranium production and enrichment.
In the latter case, it couldn’t come sooner. US uranium production in the March quarter fell -99% from the December quarter and -75% from last March quarter.
However, mills are preparing to ramp up output later this year, industry consultant TradeTech reports. One producer, Energy Fuels, is working toward the restart of production at four of its mines.
The potential ban on Russian uranium imports has market participants concerned over the capacity of the US and others to make up for lost supply, even with the ban not commencing for five years. Not just supply of uranium ore, but ore processed into enriched uranium.
In the meantime, new demand from financial entities is expected to emerge in coming weeks – presumably from the likes of the Sprott Physical Uranium Trust, which has been very quiet lately.
On that basis, TradeTech is surprised the spot uranium market remains relatively subdued – with the price gradually rising but only on low volume. Last week saw five transactions concluded totalling 550,000lbs U3O8. Utilities did come into the market last week with bids, but were quickly out-bid by traders.
So utilities missed out as TradeTech’s weekly spot price indicator rose US75c to US$54.50/lb.
One reason participants might be drawn away from the spot market at present is last week’s expiration of offers to supply a US utility with 6mlbs U3O8 equivalent in enriched product for delivery over 2025-30. The utility is expected to award contracts this week.
TradeTech’s term price indicators remain at US$54.00/lb for both mid- and long-term contracts.
The New Cycle
In the lead-up to the last uranium price cycle (2004-2008), the world saw a significant increase in contracting volumes for long-term offtake (80mlbs 2004, 250mlbs 2005, 210mlbs 2006 and 230mlbs 2007), Australian stockbroker Bell Potter notes. At the height of the pricing cycle in 2007, 435 reactors were in operation, 28 under construction, 64 planned and 158 proposed.
In 2022, it was estimated that 120-130mlbs were sold under long-term offtake (up from 55mlbs in 2021). Thus far in 2023, roughly 88mlbs have been sold under long-term offtake. There are currently 437 reactors in operation, 57 under construction, 103 planned and 325 proposed.
Bell Potter believes we are at the beginning of a new uranium contracting and price cycle, except this time forward demand is supported by net-zero goals, and a lack of near-term supply, driven by underinvestment between 2010 and 2021, which will impact the trajectory of pricing in the broker’s opinion.
To that end, Bell Potter continues to see value across the Australian listed uranium producer/developer/explorer complex.
Beyond this, Bell Potter sees opportunity for developer Deep Yellow ((DYL)), and should prices evolve as the broker anticipates, foresees a re-rating in some smaller names like Alligator Energy ((AGE)) and Lotus Resources ((LOT)).
Uranium companies listed on the ASX:
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