U3O8 Price Update: Q3 2017 in Review

Uranium (Nuclear Minerals) / Exploration, Mining, Marketing, & Acquisitions

Date posted: 10/08/17

Melissa Shaw reports that U3O8 spot prices remained stable at around $20 per pound in Q3. Prices were at $20.35 as of July 3, and rose slightly to $20.50 on August 21 before falling to $20.25 on October 2. Meanwhile, long-term U3O8 prices fell a dollar in September, and were sitting at $31 as of October 1. According to the latest Monthly Monitor report from Sightline U3O8, the spot market currently accounts for over 22 percent of all uranium purchases, which is an all-time high. Countries with a keen interested in nuclear power, such as China, India, Saudi Arabia and the United Arab Emirates, are using the situation to stock up on uranium before prices inevitably rise. Many market watchers believe that a price rise will come as major uranium companies negotiate long-term supply contracts. As Sightline U3O8 explains, “older, more profitable contracts” have allowed producers like Cameco to sell uranium at prices much higher than the average 2016 spot price, but as they come up for renewal prices will be lifted from “currently unsustainable levels.” Read on to learn more about what happened to uranium in the third quarter of the year and what may be coming as 2017 draws to a close. Speaking to the Investing News Network over the phone, Mike Alkin of the Stock Catalyst Report said that despite low uranium prices there is “a primary mine shortfall.” “There’s 180 million pounds of demand and 160 million pounds of primary mine supply, so the difference is being made up from the Japanese reactors still offline,” he explained. “The underfeeding is occurring at the enrichment facilities and the US Department of Energy. What they’re selling into the market.” According to Alkin, U3O8 prices will need to reach $55 or $60 before additional development will happen.He noted that one interesting recent supply-side development is that Kazatomprom has established a trading house in Zug, Switzerland. Kazatomprom is Kazakhstan’s national uranium firm. Riaz Rizvi, chief commercial officer at Kazatomprom, said in September that the physical presence of the trading house in Switzerland allows the company to be “very responsive to customers within very short time frames” dictated by supply-and-demand situations. Alkin the company can now “buy uranium from themselves essentially, rather than sell it into the market. Should they so choose, they can pool their inventory and sell it when they want and to whom they want. That could bring a little bit of support to the market — at least that’s my view.” He added that Kazatomprom has filed to go public next year, and “they’re going to do the best that they can to get their revenues and cash flows up” before that happens. He also pointed out that when the last uranium bull market started in 2004 to 2005, there were 23 reactors under construction and 30 to 40 million pounds of new production coming online. In the current market there are 60 nuclear reactors under construction and “literally no new production coming online.” There are currently 447 reactors in operation worldwide and an additional 160 planned, according to September data from the World Nuclear Association. All of these reactors require their initial load of uranium 30 months before operation. Notably, on October 3, just after Q3 drew to a close, Japan’s Nuclear Regulation Authority gave an initial safety approval to Tokyo Electric Power. It will allow the company to restart two of the reactors at its Kashiwazaki-Kariwa nuclear plant. The unanimous decision from five commissioners marks the first safety approvals Tepco has been granted since the 2011 meltdown of three units at its Fukushima plant. That said, it’s worth noting that the governor of Niigata prefecture, where the plant is located, has said he will not discuss a restart until the prefecture completes a review of the Fukushima disaster. The review is not expected to be completed before 2020. As a final note, Alkin said that the Trump administration is “very pro-nuclear power friendly,” which is a “sea change from what you saw over the past eight years under the Obama administration.” In late September, US Energy Secretary Rick Perry asked the Federal Energy Regulatory Commission to consider issuing new rules to ensure that nuclear and coal-fired plants are compensated, “not only for the electricity they provide but for the reliability they add to the grid.”