Is the next uranium boom imminent?


More and more research houses and investors seem to think that the recent developments in the uranium markets are a prelude to the next uranium bull market.

Below I've highlighted some of the insights from research on the dynamics in the global uranium market.

We start with what Cannacord considers the six most important charts depicting the uranium market today.

Since the Vimy presentation from which figure 1 is sourced was made, the spot has moved from $23 to $26/lb, in less than 2 months.

From figure 5 we can see that considerable demand will come online, but this will take a while to crystallize. Please find the full report at the bottom of this page.

Beside the longer-term catalyst of more nuclear plants thus more demand comes into play, there are several short term drivers that will push the price of uranium, and thus uranium miners up. An extensive industry report by Reach Markets' research team lists the following catalysts of a near term increase in the uranium price. Mind you, the bottom has already been set a few months ago.

Key short-to-medium term catalysts:

  1. Cameco indefinitely shutting down McArthur River mine – We did see the uranium price spike on the back of this news which for the industry participants, this was mostly expected.
  2. Cameco buying in the spot market to fulfil their order book.
  3. Japanese reactors coming back online. Japan is incentivised to bring on these reactors to ensure the country is adequately prepared for the 2020 Summer Olympics.
  4. A notable increase in financial participants (including new trading houses backed by Russia, China and Kazakhstan) in the uranium market recently, which has similar hallmarks to the one experienced in 2004-07 (when uranium spot price spiked from below US$50 a pound to US$100 a pound.
  5. Demand will exceed supply according World Nuclear Association. Agneta Rising, the chairwoman of the world nuclear association, came out and made a statement in recent months noting that the world nuclear association was projecting that over 2018 there would be approximately 141 million pounds of primary production globally but there would be 191 million pounds of global primary consumption, so a 50 million pounds deficit. 6
  6. Key markets around the world appear to very short (or uncovered) uranium. In particular, Japan, with utilities not taking physical delivery in recent years and in turn have kept (i.e. lend) it at the supplier (i.e. uranium producers) to be called later. The concern here is what contractual arrangements are these inventories being held under by the supplier and if they will still be holding it when the utilities do eventually call them (the producer may sell inventory thinking they will produce it in time to meet the call-date if/when that happens

Finally, in the US markets there is a local catalyst. The US has several uranium miners. The US also has 50 operational nuclear reactors. Next to that the US Navy's nuclear fleet is also required to use US won uranium. However all of the US miners only dig (or wash) up enough uranium to supply 1 (one) nuclear reactor. The rest of the required fuel comes from mines outside the US, and of that a big chunk comes from Russia and former USSR republics such as Kazakhstan. The Kazakhs for example supply the market at a very low price. In reaction to this, two big uranium miners, Energy Fuels (UUUU) and Ur-Energy (URG) have asked the government to provide the local market protection by means of Section 232 induced tariffs. In the grand scheme of this, this is but a small drop, but it could be an interesting driver for local uranium producers, of which there are only a few, and explorers and developers.

The Cannacord report

The Reach report

Some thoughts on section 232

The Ozzie view

I could go on and on and on.

disclaimer: I do own some of the companies mentioned; UUUU and URG


The View