Graphic: Supply risks fuel uranium's flight to more than 16-year peak

Sprott Physical Uranium Trust

22/01/2024 13:07

By Pratima Desai
       LONDON, Jan 22 (Reuters) - Uranium prices have hit their
highest in more than 16 years on a buying frenzy triggered after
the world's largest miner of the nuclear fuel highlighted
production risks, but the price surge is likely to mean the
restart of mothballed capacity.
    Kazakhstan's Kazatomprom  KZAP.KZ  earlier this month said
it may cut its 2024 production plan due to difficulties with the
availability of sulphuric acid needed to produce uranium.
    
    
    Uranium oxide prices  UXXc1 , under pressure for years after
the Fukushima nuclear accident in 2011 battered demand, picked
up momentum in August 2021 when disruptions caused by COVID
lockdowns hit supplies and created shortages.
    They have since rocketed 250%, and are up 15% so far this
month to their highest since November 2007 at $106 a lb.
    "After a decade of dormancy, uranium suddenly came to life
in mid-2021, rising above its long-standing cap at $30 a lb,
which also happens to be the global industry’s marginal cost of
mined production," said Liberum analyst Tom Price.
    Marginal costs of production are a reference to the costs
incurred per lb of additional output by the highest-cost
producers.
    
    
    Liberum forecasts a 300,000 lb deficit this year, down from
a shortfall of 1.1 million lbs in 2023, and estimates 2024
demand at 174.7 million lbs, up from 170.4 million lbs last
year. 
    However, "while we recognise upside price risk, we also
expect Kazatomprom and Cameco to eventually reactivate their
dormant mine capability, as the price rallies – to secure market
share and deter entrants," Price said. 
    He did not give a timeline for re-starting mothballed
capacity. 
    Toronto-listed Cameco  CCO.TO  is expected to be the world's
second largest uranium producer this year after Kazatomprom. 
    
    
    Uranium purchases by companies including the Sprott Physical
Uranium Trust  U_u.TO  and Yellow Cake  YCA.L  have contributed
to the price surge in recent months, but this, industry sources
say, would be due to demand from investors looking at
supply/demand imbalances.
   
    
    Resistance to nuclear power after Fukushima remains, but the
need to cut emissions and a growing belief that it would make
the energy transition safer and cheaper is expected to drive
uranium demand higher over the coming years.
    "Uranium is having a moment on the demand side. It is cost
effective. If it isn't green, it is certainly green adjacent,"
said Jay Tatum Portfolio manager at Valent Asset Management.
    "It would be hard to call a top in uranium prices, but five,
six, seven years down the line, I don't think it will be making
new highs."

    

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Cameco and Kazatomprom share price    https://tmsnrt.rs/47Kk678
Uranium demand and supply -Liberum    https://tmsnrt.rs/4b0M4yx
Uranium market balance -Liberum    https://tmsnrt.rs/3HoZN4r
Uranium price    https://tmsnrt.rs/3U9AbAe
Sprott Physcial Uranium Trust    https://tmsnrt.rs/47ITseQ
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Pratima Desai; Editing by Jan Harvey)
 ((pratima.desai@thomsonreuters.com; +44 207 513 5681;))