Weekly Reports | Apr 07 2020
After years of lacklustre uranium prices and a lack of any urgency on the part of utilities, suddenly the virus has markedly changed the nuclear energy equation.
-Coronavirus fallout has proved beneficial for uranium prices
-Market volumes jump led by financial traders and uranium producers
-Current crisis emphasises the need for secure power generation, including via nuclear reactors
By Greg Peel
If you’re ever in need of personal protective equipment, look no further than a nuclear power plant. PPE is a daily necessity, and to that end power companies keep plenty on hand.
As “we’re all in this together”, some North American power companies have begun to donate PPE from their stockpiles to frontline healthcare workers in their communities. Ontario Power Generation, for one, can provide over one million items, including masks, gloves and gowns.
Nuclear power plants are some of the most well-prepared industrial sites in the world, equipped to handle a variety of contingencies. And despite a decline in electricity demand from locked down countries, cities and towns, secure power generation is critical at this time. Nuclear generation provides over 10% of the world’s electricity.
In the US, the Nuclear Regulatory Commission issued a letter on March 28 detailing the process for ensuring that plant operators have flexibility in scheduling staff during the Covid-19 crisis to ensure continued safe and secure operations.
Hence, nuclear power plants will not shut down. But uranium mining operations have, across the globe, led by Canada’s Cameco, which the week before last shut down its globally significant Cigar Lake mine for the sake of worker safety.
Demand for secure supply at this time meets curtailed supply. A pressure valve has to go off, and it has, in the form of a 15% jump in spot uranium prices in a mere two weeks, after years of wallowing in the depths.
Sparked into Action
In the last five days of March, uranium transaction volumes surged, industry consultant TradeTech notes, taking spot market turnover to 8.6mlbs for the month. Supply curtailment announcements by Cameco, Kazatomprom and others spurred uranium traders and producers into action, only to meet sellers backing off offer prices in a hurry. Utilities were also spotted, but remain sluggish by comparison.
TradeTech’s spot price indicator rose to US$27.30/lb at end-March from $24.90/lb at end-February. A lack of urgency on behalf on utilities, given high levels of stockpiled material, has meant the spot uranium price traded under US$26.00/lb for most of the past year, despite supply curtailments and shutdowns brought about by too-low prices.
The coronavirus has come out of the blue for everyone, including nuclear power generators.
Six more spot transactions totalling 600,000lbs were recorded in the first three days of April, taking TradeTech’s weekly spot price indicator to US$27.60/lb, up US60c week on week, following a US$3.05/lb surge the week before.
Activity also stepped up in uranium term markets, just to show utilities aren’t completely asleep at the wheel. TradeTech’s monthly term price indicators have risen to US$31.00/lb from US$28.25/lb (mid), and to US$34.00/lb from US$33.00/lb (long).
What Now?
So far the main panic buyers of uranium have been traders and producers. Producers need to buy to satisfy delivery contracts, although given “we’re all in this together” one presumes some leniency might be granted on obligations with production shut down due to the virus.
One day this production will restart, and if prices continue to rise, one day production previously shuttered due to low prices may restart. But of course, as soon as production comes back on line, prices will fall back again unless utilities, having done little for years, see the virus scare as reason to recommence inventory restocking.
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