Weekly Reports | Nov 07 2023
While the spot uranium price fell back slightly last week, the upward trend across the price curve remains solid.
-Uranium spot price ticks back
-Term price indicators move up, again
-Largest producers facing guidance downgrades
-Demand/supply balance remains uneven
By Greg Peel
Volatility, combined with an underlying upward trend, characterised the spot uranium market throughout the month of October, industry consultant TradeTech notes. After falling early in the month, buyers soon stepped in, leading to a net gain over the period.
TradeTech’s end-October spot price indicator rose to US$74.75/lb from US$73.15/lb at end-September.
Buyers in the spot market in October included financial entities, traders, producers, and utilities. Volatility was driven largely by strong demand across the nuclear fuel sector and limited near-term supplies.
The positive outlook for the uranium price continues to attract the attention of the financial sector, TradeTech notes, with several new entrants emerging recently to join incumbent players such as the Sprott Physical Uranium Trust and Yellow Cake Plc. These entities offer the potential of additional liquidity, but they also represent additional demand in a market with little excess or uncommitted supply in the spot and near-term markets.
In the first few days of November, leading up to last Friday, the spot price did nevertheless retreat, as sellers seek to capitalise on the recent rise in prices and meet sales objectives for the year. In addition, buyers were showing some resistance to the US$75/lb level, TradeTech reports, on offers by sellers last week, with bid prices falling back since month-end.
TradeTech’s weekly spot price indicator fell -US$1.00 to US$73.75/lb.
Term Action
In the term uranium market, several utilities completed evaluations and selected preferred suppliers during October, TradeTech reports. Many of these transactions reflected prices that were representative of where the market was when offers were originally submitted to buyers, in some cases several months ago.
Ten utilities worldwide are already evaluating offers or are expected to enter the market soon seeking material in the mid- and long-term time periods. This level of term demand presents sellers and buyers with challenges.
The combination of a stressed supply chain and expanded expectation for additional nuclear generation worldwide, as well as certainty for ongoing operations especially in the US, has resulted in a market price response. These factors have caused term uranium prices to rise, although at a somewhat slower pace than prices in the spot market.
TradeTech’s mid-term price indicator has risen to US$75.00/lb from $73.50 at end-September and the long-term price to US$65.00/lb from US$62.00/lb.
The Long View
Longview Economics expects the uranium market should remain tight in the long-term, albeit with potential weakness in the near-term if Longview’s view on a US/global recession next year is correct.
In particular, mined supply growth remains slow (Cameco revised down 2023 production guidance by almost -10% last month), deglobalisation is disrupting supply chains (eg Russia and China versus the West) and, as the world shifts into two key centres of influence, adds to the attractiveness of uranium as a hedge against that shifting geopolitical landscape.
On the other side of the equation, Longview notes demand is re-accelerating, driven by growth in reactor capacity (particularly in China) and improved sentiment towards nuclear power (particularly in Europe given still high electricity/natural gas prices, but also in the US and Japan).
Shares of uranium miners have also rallied globally. Most strikingly though, notes Longview, junior miners have been outperforming large-cap uranium stocks. That phenomenon is typical at the beginning of a commodity super-cycle, as promising junior miners often have small mines with high-growth potential, thereby providing a new source of much-needed uranium.
Demand/Supply
In the wake of its September quarter earnings result, second-largest global uranium producer Cameco pointed to a substantial increase in long-term contracts within the industry, with up to 145mlbs contracted year to date — a level not seen in the past ten years.
In particular, Cameco saw focus on long-term supply from European utilities, given rising electricity costs and need to bolster energy security. The company also cited demand from "those who might have thought they'd be shutting down a reactor early.. [or] those who are now pursuing the life extensions for reactors".
France recently extended the life of a 40 year-old reactor for the first time in the country's history.
In addition to Cameco’s production downgrade, driven by factors including equipment issues, labour disputes, and start-up delays at its Canadian operations, largest producer Kazatomprom reported September quarter production down -7% quarter on quarter and -5% year on year.
2023 guidance was left unchanged but management stated "issues associated with limited access to certain key materials, such as sulfuric acid, remain persistent, and might potentially have a negative impact on 2024 production”.
On the balance of the above, Morgan Stanley has warned of upside risk to its June quarter 2024 spot uranium price forecast of US$75/lb.
Uranium companies listed on the ASX:
| ASX CODE | DATE | LAST PRICE | WEEKLY % MOVE | 52WK HIGH | 52WK LOW | P/E | CONSENSUS TARGET | UPSIDE/DOWNSIDE |
|---|---|---|---|---|---|---|---|---|
| 1AE | 06/11/2023 | 0.1000 | 0.00% | $0.24 | $0.05 | |||
| AGE | 06/11/2023 | 0.0500 |  4.00% |
$0.07 | $0.03 | $0.080 | 60.0% |
|
| BKY | 06/11/2023 | 0.3600 | 8.96% |
$0.80 | $0.26 | |||
| BMN | 06/11/2023 | 2.4900 |  – 3.91% |
$3.05 | $1.19 | $3.200 | 28.5% |
|
| BOE | 06/11/2023 | 4.3100 | 0.69% |
$4.98 | $1.97 | 47.7 | $4.543 | 5.4% |
| DYL | 06/11/2023 | 1.2000 | – 3.59% |
$1.41 | $0.48 | $1.840 | 53.3% |
|
| EL8 | 06/11/2023 | 0.4200 | 7.69% |
$0.59 | $0.27 | |||
| ERA | 06/11/2023 | 0.0400 | 6.06% |
$0.30 | $0.03 | |||
| LOT | 06/11/2023 | 0.2500 | 13.04% |
$0.29 | $0.15 | $0.530 | 112.0% |
|
| NXG | 06/11/2023 | 8.9400 | 1.66% |
$10.40 | $5.11 | |||
| PDN | 06/11/2023 | 0.9600 | 1.06% |
$1.15 | $0.52 | 164.3 | $1.165 | 21.4% |
| PEN | 06/11/2023 | 0.1200 | 0.00% | $0.20 | $0.09 | $0.270 | 125.0% |
|
| SLX | 06/11/2023 | 3.4400 | 8.41% |
$5.32 | $2.56 | $5.800 | 68.6% |
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