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General Market Commentary
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General Energy
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General Market Commentary
Is the long-awaited supply shock finally here for uranium?
Canada’s Cameco this week announced it was shuttering Cigar Lake, the world’s largest uranium mine, for at least four weeks after directives from the Canadian and Saskatchewan provincial governments.
The Canadians are concerned about the use of fly-in, fly-out workers while COVID-19 is spreading.
Meanwhile, Namibia, a key supplier of uranium to China’s nuclear fleet, has closed down all mining until the virus comes under control. The country’s large Rossing mine is operated by a state-owned Chinese company.
However, the world’s biggest exporter Kazakhstan is so far sticking to its uranium sales plan, though six of its main cities are now in lockdown.
Back in Canada, Denison Mines has suspended the environmental assessment for the Wheeler River uranium project in Saskatchewan, while New York listed Uranium Energy Corp has postponed plans to resume drilling at its Burke Hollow project in Texas.
And Australia’s Ranger mine is to close next year.
Uranium market
Cameco, Kazakhstan’s Kazatomprom, and France’s Orano are the three main players in the uranium market.
In the past two weeks, the spot uranium price has risen by 14% to hit US$27 per pound, ending a long period locked into a range between US$24/lb and US$26/lb.
The reason given by analysts: just six mines around the world produce two-thirds of the uranium needed to power the 442 reactors across 31 countries. In the past 15 years, China has gone from three nuclear power stations to 45.
Twenty new reactors are due to be connected to grids this year.
Nuclear capacity under construction and planned.
Moreover, another 495 reactors are to be built or are already under construction, with projections of demand reaching 247 million pounds per year (against 170Mlb at present).
Some 85% of that 170Mlb is supplied through long-term contracts.
Additionally, nuclear electricity output increased 2.8% in 2018 – the best growth since 2010.
As reported recently, the latest Resources and Energy Quarterly from the Department of Industry, Science, Energy and Resources has forecast that tight supply conditions will force a lift in uranium prices.
Two weeks ago there was already detectable upward movement in the spot uranium price.
“With supply remaining constrained, reactor constructions in Asia, the Middle East and Eastern Europe should push prices up slowly with a levelling out above US$40/lb by 2024,” the report added.
However, the report’s authors warned that many mining projects had been abandoned or placed in hiatus in recent years, and uranium mines can take significant time to start or restart.