Joe Reagor reports that there are two parts to why the the spot price of uranium has not recovered. First is the uranium spot market has been rather tight in terms of overall % of production, and there have been some nuclear plant closures in addition to shutdowns in Japan after Fukushima. Add to that uranium production growth that has come on-line and ramping up production and creating a larger amount of spot uranium to be sold into a weak market. The Cameco Corp. Cigar Lake is an example of that. Extra pressure is building on the spot market, but contract pricing has remained relatively stronger, e.g., in the low $40s per pound U3O8.
Mining companies are making decisions based on the contract price, not the current spot price. So there is a disconnect between spot and contract pricing. For example, Energy Fuels Inc. has moved to being a lower-cost producer and to have a mix of conventional and in-situ recovery. The other reason for a lack of spot uranium recovery is Fukushima. That has had a longer and more lasting impact on the overall market than annalists thought possible. The restarts in Japan have been slow, but that is just one country in the overall puzzle. Other countries have looked at Fukushima as a reason to change regulations, which has stalled the development of additional reactors. China, for example, had a three-year hiatus from allowing any nuclear reactor project to be developed, as it rewrote its regulations.
So, as the supply has come on-line and demand has not been created and hence prolonged this oversupply. Looking out to 2018 - 2019, a decline in production is expected which should result in a significant rise in uranium spot and contract prices. Most analysts are forecasting potential for a full recovery in uranium prices to be more sustainable and long-term price levels of $50 - 60/lb. Look to Uranium Resources Inc., Denison Mines Corp, Ur-Energy Inc., UEC, and Energy Fuels will be top producers soon as the price increases.
Original working URL: https://www.theenergyreport.com/pub/na/16958
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