Weekly Reports | Jun 18 2024
Short term U3O8 spot price weakness belies the potential growth in demand and fragility of longer-term supply chains, a positive for the uranium bulls.
-U3O8 spot prices remain volatile as utilities stand back from the market
-Annual US uranium stockpiles rose in 2023 with Australia a significant supplier
-Canaccord Genuity, the latest broker to espouse the bull case for longer-term uranium demand
By Danielle Ecuyer
Short term pricing instability belies medium term fundamentals
The spot price uranium market remains at elevated levels of price volatility, industry consultant TradeTech observes.
Last week’s market vacillated with Monday’s prices between US$82.50lb and US$84lb, rising to US$83lb on the Tuesday before settling down towards the end of the week and finishing unchanged at US$85lb.
Focusing out, the spot price has fallen -21% from a 16-year high in February at US$107lb, but at an average US$93.21lb the spot price remains 39% above the 2023 average.
Utilities continue to focus on the recent Department of Energy (DOE) waiver exemption details for the period up until January 1, 2028, when further import of Russian material is vetoed.
Utilities remain essentially focused on preparing waiver applications in the near-term.
TradeTech highlights US utilities added further inventory or contract commitments in 2023 and the market indicates, despite short term weakness, the mid- and longer-term markets remain stable.
The mid-term TradeTech U3O8 price indicator stands at US$93.50lb and the Long-Term price at US$80lb.
Turning to the Uranium Marketing Annual Report 2023, released by the US Energy Information Administration (EIA) last week, US civilian nuclear power reactors bought 51.6m pounds of uranium in 2023, up 27% on the total deliveries in 2022.
Canada delivered the most at 27% of the total, with Kazakhstan and Australia each contributing around 22% each. Russia and Uzbekistan accounted for 12% and 10%, respectively.
Inventories held by US commercial inventories across US brokers, converters, traders, nuclear power plant operators et al, rose to 152m pounds from 143.1m pounds in 2022.
Multiple secular trends are expected to underpin demand growth
Canaccord Genuity is the latest broker to provide a positive update on the outlook for uranium.
Looking past the near-term weakness in the spot price, the broker posits the supply/demand dynamics are ripe to support medium to longer term support for uranium.
Canaccord identifies the fragility of the supply side due to US sanctions on Russian imports, targeted production cuts from Kazatomprom, and Niger instability.
Uranium supply is highly concentrated with Canada’s Comeco and Kazatomprom-related projects combined accounting for 62% of primary mine supply in 2023.
From a demand perspective, nuclear energy’s role in meeting several criteria is increasing above what can possibly be supplied via restarts and brownfield expansions, the broker believes.
After ten years of under-investment and mine closures, think Ranger and Cominak, supply of uranium is at a 12-year low at 123m pounds against demand of around 180m pounds and secondary supply is waning.
Demand for reliable energy in sufficient supply for decarbonisation goals (electrification across mobility included) and expected data center power demand infers the world will need more uranium and a clearer price signal will be necessary to kick start greenfield projects.
Putting the data centre demand into perspective, it is expected Nvidia will ship 1.5m server units by 2027. When running at full capacity, these chips would consume some 85.4Twh of electricity annually. This equates to the amount of energy a small country uses annually.
Amazon owned AWS is expanding its data centre footprint adjacent to Talen Energy’s 2.5GW nuclear power plant.
A hyperscaler data centre like those operated by Microsoft (Azure), Amazon (AWS) and Google (Google Cloud) can consume the equivalent of 80,000 households of electricity.
On balance, Canaccord Genuity is forecasting uranium demand to grow at circa 3.2% p.a. through to 2035, with 59 new reactors under construction as at June 2023.
China is building the largest capacity expansion, followed by India, Turkey, South Korea, Egypt and the UK.
For more reading on what’s happening in uranium markets:
https://fnarena.com/index.php/2024/06/12/uranium-week-namibia-in-focus/
https://fnarena.com/index.php/2024/06/04/uranium-week-preparing-for-the-nuclear-age/
https://fnarena.com/index.php/2024/05/28/uranium-week-soft-us-import-waivers/
https://fnarena.com/index.php/2024/05/14/uranium-week-us-boycott-enthusiasm-fades/
Uranium companies listed on the ASX:
| ASX CODE | DATE | LAST PRICE | WEEKLY % MOVE | 52WK HIGH | 52WK LOW | P/E | CONSENSUS TARGET | UPSIDE/DOWNSIDE |
|---|---|---|---|---|---|---|---|---|
| 1AE | 14/06/2024 | 0.0700 |  -12.50% |
$0.19 | $0.05 | |||
| AGE | 14/06/2024 | 0.0500 | – 3.51% |
$0.08 | $0.03 | $0.100 |  100.0% |
|
| BKY | 14/06/2024 | 0.3600 | – 3.75% |
$0.80 | $0.26 | |||
| BMN | 14/06/2024 | 3.8700 | – 3.13% |
$4.87 | $1.44 | $7.400 | 91.2% |
|
| BOE | 14/06/2024 | 4.0200 | – 8.00% |
$6.12 | $2.83 | 40.6 | $5.425 | 35.0% |
| DYL | 14/06/2024 | 1.4100 | – 7.03% |
$1.83 | $0.65 | $1.770 | 25.5% |
|
| EL8 | 14/06/2024 | 0.4600 | 2.08% |
$0.68 | $0.29 | |||
| ERA | 14/06/2024 | 0.0400 | 0.00% | $0.08 | $0.03 | |||
| LOT | 14/06/2024 | 0.3700 | – 3.70% |
$0.49 | $0.17 | $0.660 | 78.4% |
|
| NXG | 14/06/2024 | 10.5400 | – 4.03% |
$13.66 | $6.56 | $17.500 | 66.0% |
|
| PDN | 14/06/2024 | 13.4100 | – 7.70% |
$17.98 | $6.70 | -228.7 | $16.310 | 21.6% |
| PEN | 14/06/2024 | 0.1000 | – 4.55% |
$0.20 | $0.08 | $0.260 | 160.0% |
|
| SLX | 14/06/2024 | 5.4400 | – 4.18% |
$6.74 | $2.92 | $7.600 | 39.7% |
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