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[“Sustainable”] Uranium Prices Poised To Rally

Oilprice.com | April 3, 2021

The uranium market is emerging from years in the doldrums as the overhang from the nuclear disaster in Japan is cleared and global demand picks up steam.

The spot price for U3O8 moved above $30 per pound for the first time this year as uranium producers and mine developers hoover up above-ground inventories and reactor construction continues apace.

Two new research notes from BMO Capital Markets and Morgan Stanley say today’s price marks a floor and predict a rally in prices over the next few years to the ~$50 level by 2024.

The stars seem to be aligning for a new phase of nuclear energy investment with the US, China and Europe bolstering the bull case for the fuel this month.

Although nuclear energy was not mentioned explicitly in the $2 trillion Biden infrastructure proposal released today, its federally mandated “energy efficiency and clean electricity standard” is hardly achievable without it.

Source: Cameco

Over the weekend leaked documents showed a panel of experts advising the EU is set to designate nuclear as a sustainable source of electricity which opens the door for new investment under the continent’s ambitious green energy program.

China’s 14th five-year plan released a fortnight ago also buoyed the uranium market with Beijing planning to up the country’s nuclear energy capacity by 46% – from 48GW in 2020 to 70GW by 2025.

There are several factors working in uranium’s favour, not least the fact that annual uranium demand is now above the level that existed before the 2011 Fukushima disaster when Japan shut off all its reactors:

  • Uranium miners, developers and investment funds like Yellow Cake (13m lbs inventory build up so far) are buying material on the spot market bringing to more normal levels government and utility inventories built up over the last decade
  • Major mines are idled including Cameco’s Cigar Lake (due to covid-19) which accounts for 18m lbs or 13% of annual mine supply. The world’s largest uranium operation McArthur River was suspended in July 2018 taking 25m lbs off the market
  • Permanent closures so far this year include Rio Tinto’s Ranger operation in Australia (3m lbs) and Niger’s Cominak mine (2.6m lbs) which had been in operation since 1978. Rio is exiting the market entirely following the sale of Rössing Uranium in Namibia
  • Like Cameco, top producer Kazatomprom, which mined 15% less material last year due to covid restrictions has committed to below capacity production (–20% for the state-owned Kazakh miner) for the foreseeable future
  • Price reporting agency and research company UxC estimates that utilities’ uncovered requirements would balloon to some 500m lbs by 2026 and 1.4 billion lbs by 2035
  • Roughly 390m lbs are already locked up in the long term market while 815m lbs have been consumed in reactors over the last five years, according to UxC
  • There are 444 nuclear reactors in operation worldwide and another 50 under construction – 2 new connections to the grid and one construction start so far in  2021
  • Much cheaper and safer, small modular nuclear power reactors which can readily slot into brownfield sites like decommissioned coal-fired plants (or even underground or underwater) are expected to become a significant source of additional demand.

There are caveats to this rosy scenario, however.

Morgan Stanley warns that “the opacity of the inventory situation remains a key uncertainty to price – see for example palladium, which needed almost 7 years of deficit before the price really took off.”

BMO says given the still high levels of inventories “acute shortages and price squeezes are extremely unlikely, both for this year and the foreseeable future,” adding that “there is no obvious need for new mine supply in the near future.”

April 4, 2021 - Posted by | Environmentalism, Nuclear Power, Progressive Hypocrite | ,

4 Comments »

  1. Noted. Hmmm–haven’t I read over the years (not so much recently) that Afghanistan is home to many trillions of dollars of unexploited precious minerals and metals? Assuming that uranium is among them, could this affect the “end” of the US’ 20-year War On Afghanistan?

    Like

    Comment by roberthstiver | April 5, 2021 | Reply

    • Afghanistan is a landlocked and mountainous nation. Developing its mineral resources would require massive investment in roads and rail lines. There are plenty of better prospects out there for just about any mineral.

      The news here is that the “great reset / green new deal” is slated to host a massive expansion of nuclear power generation. All part of the hidden agenda that the public would never democratically approve of absent an “existential” crisis.

      Liked by 1 person

      Comment by aletho | April 5, 2021 | Reply

  2. I believe China’s BRI will open up Afghanistan….

    I also believe that nuclear-power generation can be safe and super efficient, and new technology seems to augur that outcome. Big oil (OilPrice) would be opposed. Of course, natural disasters can always intervene, but Japan (e.g.) has learned to “earthquake-proof,” to the extent possible, its Tokyo high-rises and infrastructure in mitigation….

    (To me, given humanity’s predilection to greed and other avarice esp. at “elite” levels, “public”–“democracy” is an oxymoron.)

    Like

    Comment by roberthstiver | April 5, 2021 | Reply

    • BRI will open Kabul and a narrow strip of the nation. Not likely where the uranium might be.

      This is why oil and gas development has not occurred in so many third world nations. Building long roads through mountains or swamps is a huge cost.

      I found out that offshore drilling is cheaper. Same with mining. It will be a long time before Afghanistan’s mineral wealth could be tapped.

      Yes, the latest, newest nuclear reactors are always “safe”. How could it be otherwise?

      Liked by 1 person

      Comment by aletho | April 5, 2021 | Reply


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