By Greg Peel

UBS’ global resource sector analysts have undertaken a quarterly update of commodity price forecasts and as a result, revised down their average spot uranium price forecasts for the years ahead. Significant downward revisions are driven by the slow pace of Japanese reactor restarts on the demand side meeting strong production from Canada’s Cameco on the supply side.

The broker’s 2016 forecast falls to (all prices in US$/lb) 30 from 37. For 2017, UBS has cut to 32 from 55, for 2018, to 42 from 60 and in 2019, to 55 from 60.

The pace of Japanese reactor restarts has been much slower than UBS, or anyone else, expected two years ago. There are 42 operable reactors in the country potentially able to restart, but so far only two have actually restarted and a third hopes to restart next month. There are 24 in the process of approval, but most remain bogged down in this process or held up by court actions and public protest.

There are 444 reactors currently operating globally, UBS notes. Of those, 33 are Chinese. There are 21 reactors currently under construction in China, 42 in the planning stage and a further 170 proposed.  While the uranium market has been waiting a long time for Japanese restarts, clearly China is the key driver of increased demand.

While low uranium prices have forced the shutdown of marginal production at various mines across the globe, supply growth continues in Canada and Africa. In Canada, increased production at Cameco’s premier Cigar Lake mine has accounted for virtually all global production growth in the year to date.

UBS believes the longer term picture for uranium remains positive, driven by demand growth from China and eventual demand growth from Japan. However the nearer term picture is not as healthy, given the slow pace of Japanese restarts and supply growth increasing ahead of demand growth. The broker expects the spot price to languish in the low 30s over 2016-17, which is roughly the marginal cost of production.

The uranium market saw a quiet start to July, industry consultant TradeTech reports. Only four transactions totalling 750,000lbs U3O8 equivalent were concluded in the spot market last week and TradeTech’s weekly spot price indicator is unchanged at US$26.40/lb.

Year to date spot volumes have risen to a total of 18.6mlbs compared to 26.9mlbs over the same period last year.

Yet low prices have not discouraged every new uranium project.

Only recently has a longstanding ban on uranium mining been lifted in the state of Western Australia. Having been given local indigenous approval, Toro Energy ((TOE)) is proceeding to definitive feasibility study (DFS) status for its Wiluna project. The project consists of six deposits, two of which have received government approval for mining, providing the opportunity for Wiluna to become the state’s first ever uranium mine.

Hot on the heels of Toro is Vimy Resources ((VMY)). A DFS on the company’s Mulga Rock project is expected to be completed early next year. Mulga Rock has been granted environmental approval but awaits final government approval.

Bannerman Resources ((BMN)) has not given up on its Etango project in Namibia. Bannerman has been denied a Namibian mining licence for the project, but only because of low uranium prices. The company has the right to re-apply if prices improve.

One transaction was reported in the uranium term markets last week, TradeTech reports, for a small mid-term delivery. TradeTech’s term market price indicators remain unchanged at US$28.15/lb (mid) and US$40.00/lb (long).
 

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By Greg Peel

Shikoku Electric Power has started loading fuel into its Ikata unit 3 plant in preparation for its planned restart later in the month. Assuming all goes ahead, Ikata would become the fifth Japanese reactor to restart in the five years since Fukushima.

Despite the slow pace of restarts in Japan and the announcement of several reactor closures in the US, global nuclear capacity additions hit 10.2GW in 2015, industry consultant TradeTech reports – the fastest growth rate in 25 years. Growth was mostly driven by China, with help from South Korea and Russia.

But capacity growth has done little to support uranium prices. The month of June saw a glimmer of hope as the sport uranium price rose to US$28.25/lb but it just as quickly retreated to US$26.00/lb. As activity slowed towards the end of last week ahead of the US long weekend, TradeTech’s spot price indicator fell US40c from last week’s US$26.80/lb to end the month on US$26.40/lb.

The price dip mid-month did encourage some buyers to pick up excess inventory at attractive prices. TradeTech reports 27 spot market transactions over June totalling 3.4mlbs U3O8 equivalent.

Five transactions were reported in the term markets, all of them mid-term. Producers are under pressure as intermediaries are looking to take more of the market, forcing term prices lower despite some rekindling on interest from utilities. To that end, TradeTech’s mid-term price indicator has fallen US85c to end the month on US$28.15/lb. The consultant’s long term price indicator has fallen US$1.00 to US$40.00/lb.
 

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By Greg Peel

Last week the uranium market, like all markets, ended the week with news of the Brexit. As is well appreciated, the UK referendum result threw up more questions than answers. One question that arose is whether Brexit would impact on Britain’s planned program of new nuclear reactor building, which will be undertaken by foreign construction companies.

Britain’s nuclear industry experts took the opportunity to reiterate the UK must move forward with its build program, despite the vote to leave the EU, in order to meet emission targets. Power companies EDF Energy, NuGeneration and Horizon Nuclear Power emphasised their commitment to that program.

The Brexit decision did not have any impact on uranium trading last week, which remained relatively calm as Brexit turmoil raged on. Falls in the spot price in recent weeks did entice a few buyers into the market, industry consultant TradeTech reports, including utilities. Five transactions totalling 800,000lbs U3O8 equivalent were concluded.

Having fallen sharply the week before, TradeTech’s weekly spot price indicator has risen US80c to US$26.80/lb.

Beyond Brexit, the global uranium market continues to reel from announced planned closures of legacy US reactors due to economic unviability. What are not forthcoming are any counter-plans to upgrade old or build new reactors, despite an agreed need to do so. Last week Pacific Gas & Electric joined in the recent spate of US reactor closure announcements.

The company will close its Diablo Canyon Nuclear Station in 2025 and replace the two reactors with investment in a green portfolio of energy efficiency, renewables and energy storage. The announcement brings to an end a volatile relationship with community and environmental groups.

With regard new reactor building, the global nuclear industry delivered a strong operational performance and improvements in construction time in 2015, according to a report from the World Nuclear Association. The report suggests that in order to meet climate change targets, the world, including the UK, will need to accelerate the rate of construction.

Two transactions were reported in the uranium term markets last week, involving delivery contracts beginning in 2018. TradeTech’s term price indicators remain unchanged at US$29.00/lb (mid) and US$41.00/lb (long).
 

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By Greg Peel

In 2015 the uranium market was focused on supply, as mines across the globe shut down operations and new supply projects were shelved awaiting a future improvement in the uranium price. Long expected price support from the demand side – the restart of Japan’s reactors – was a long time coming.

In 2016 supply curtailments continued but none were able to spark any life into the uranium price. Japan has managed to only restart two of the country’s 50-odd reactors. As the end of the first half approaches, the spot uranium price has fallen 24% year to date and 10% in a month.

Still reeling from the planned shutdown of three Exelon reactors, the uranium market was further spooked last week by the announced shutdown of a fourth US reactor, at Fort Calhoun. The decision was prompted by the final version of the US Clean Power Plan. Original drafts of the environmental legislation offered credits for nuclear power plants given they do not omit greenhouse gases, but the final version has omitted such credits.

Ongoing operation of the Fort Calhoun plant has thus been deemed uneconomic. The US shutdown count has now risen to four but industry observers suggest 15-20 reactors could be shut down over the next several years.

The demand-side news did not get any better on the other side of the Pacific. Units 3 and 4 of the Takahama plant in Japan have been approved for restart from a safety perspective, but last week the local court upheld an injunction keeping the reactors offline. Kansai Power Co has mounted a legal challenge to the injunction and hopes to have the units restarted in the next couple of months.

There is little doubt the US and Japanese news had a negative impact on uranium market sentiment last week, industry consultant TradeTech suggests. Fresh urgency from sellers had buyers backing off, sending prices lower as the week progressed. Nine transactions were ultimately completed totalling 850,000lbs U3O8 equivalent.

TradeTech’s weekly spot price indicator has fallen US$2.00 or 7% to US$26.00/lb.

The most recent peak in the spot price was US$37.75/lb, marked in October last year. The recent low was seen in April this year at US$25.50/lb. The previous low of US$24.00/lb was marked in April 2005.

One small transaction was reported in the mid-term market last week. TradeTech’s term price indicators remain unchanged at US$29.00/lb (mid) and US$41.00/lb (long).
 

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By Greg Peel

The Indian prime minister’s visit to the US included a joint announcement from President Obama and Prime Minister Modi that engineering and design work has been commenced on a site in India at which Westinghouse is to build six nuclear reactors.

This was at least some good news as industry participants met last week in New Orleans for the annual World Nuclear Fuel Market conference. The mood was otherwise subdued as the industry continued to reel from the news major US nuclear energy producer Exelon will be shutting down three reactors.

Meanwhile, the Swedish parliament has voted to abolish the country’s tax on nuclear power in support of a goal of making Sweden 100% fossil fuel-free by 2040.

On the supply side, Denmark has passed legislation to permit and regulate uranium export from Greenland. The legislation comes into place at the right time for Greenland’s only advanced project predicted to produce uranium, Kvanefjeld, which is owned by ASX-listed Greenland Minerals & Energy ((GGG)).

There was little activity reported in uranium markets last week. Industry consultant TradeTech reports only four transactions totalling 850,000lb U3O8 equivalent. While utilities did appear on the buy-side, buyer complacency is frustrating sellers stuck with excess material. TradeTech’s weekly spot price indicator has fallen US25c to US$28.00/lb.

There were no transactions reported in term markets last week. TradeTech’s term price indicators remain unchanged at US$29.00/lb (mid) and US$41.00/lb (long).
 

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By Greg Peel

After a slow start to last week following the US public holiday, activity picked up in the spot uranium market such that by week’s end, industry consultant TradeTech’s weekly spot price indicator had risen US$1.00 to US$28.25/lb. Six transactions were concluded totalling 600,000lbs U3O8 equivalent.

The buying interest nevertheless came from traders and intermediaries rather than from end-users, possibly prompted by the sudden US$1.60 fall in the spot price the week before.

Uranium Week highlighted the issue of lack of utility demand two weeks ago (Interest Continues To Build), and specifically the problem facing the US. Macquarie has since drawn upon the problem in seeking explanation as to why utilities have not been stepping in to acquire material in the US$28-30/lb range as they had been doing prior to this year, thus contradicting analyst forecasts.

For starters, there is a certain level of self-explanation. Having seen this price range as sufficiently low to trigger stockpiling, US utilities increased their inventories last year and therefore are in no rush to keep on stockpiling this year. Macquarie points to the incidence of US utility Exelon steeping in at US$28/lb in 2014 and clearing out the entire spot market surplus single-handedly.

The news from last week however is that Exelon intends to shut down one nuclear power plant next year and another two-unit plant in 2018. There are five new reactors currently under construction in the US, but the industry has suggested there could be up to 15-20 older reactors set to be shut down over the next 5-10 years. In other words, the net number of US reactors is set to fall unless there’s a sudden burst of new construction.

The US is the world’s largest producer of nuclear power and subsequently the world’s largest consumer of uranium, accounting for 30% of global supply. Half of all US reactors operate in deregulated electricity markets, Macquarie notes, in which nuclear has to compete with gas-fired plants enjoying cheap prices for shale gas and with renewable energy enjoying government subsidies and grid access priority.

That the likes of Exelon should choose to shut down older reactors rather than revamp them or replace them is testament to market economics and the commercial viability of US nuclear power going forward.

Not that demand for nuclear power isn’t growing elsewhere in the world, particularly in emerging markets. China is leading the race in reactor builds, India has plans in place, South Africa is about to commission construction of up to eight reactors and now Nigeria has pledged US$80bn for nuclear reactor construction.

But with the pace of Japanese reactor restarts at best glacial and at worst, eternally impeded by popular dissent, a declining reactor count in the US and plans in Germany, for example, to phase out nuclear power threaten to undermine the demand side of a commodity threatened by over-supply. Despite significant supply curtailments across the globe in the face of weaker prices, the uranium spot price is still languishing due to tepid demand.

One transaction was concluded in the uranium mid-term markets last week, TradeTech reports, but only for 300,000lbs to be delivered over three years. TradeTech has now trimmed its term price indicators, by US25c to US$29.00/lb (mid) and by US1.00 to US$41.00/lb (long).
 

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