Activity in uranium markets slipped back to more normal levels in May as utilities remain reluctant to commit.
-US uranium purchases up 20% in 2019
-Purchases from non-allies exceeded those from allies
-Utilities still expected to come to the market this year
A recent US Department of Energy report into the US uranium market, which at 28% of demand is the world’s largest, continued to point to nuclear energy remaining a fundamental source of baseload power at 20% of electricity production, Canaccord Genuity notes. While the virus has had an impact, capacity is steady at 93%.
Total US purchases of uranium were up 20% year on year in 2019, 90% of which came from offshore. Purchases from Russia (15%) remain below the 20% cap enforced by the Russian Suspension Agreement in 1992, which is due to expire this year, but President Trump’s Nuclear Fuel Working Group has recommended this be extended.
While Canada remained the top supplier to the US in 2019, the combined purchases of uranium from Russia/Kazakhstan/Uzbekistan exceeded those from Canada/Australia/US for the first time, Canaccord reports, and this may be exceeded further in 2020 given shutdowns at Canada’s Cameco operations.
Deliveries of uranium on a spot basis were 22% in 2019, the highest proportion since 2014, indicating, Canaccord suggests, long term supply contracts signed in the wake of Fukushima (2011-15) are beginning to expire. Of those spot purchases, 40% were made not by utilities but by US traders, pushing up monthly volumes to the highest level in two years – a trend that has accelerated in 2020.
This suggests traders are anticipating utilities will need to come to the market more aggressively very soon – a view supported by industry consultant TradeTech. US utility inventories dropped by -3% in 2019, the DoE report notes, to less than three years coverage. With the virus providing greater supply uncertainty, Canaccord expects utilities will become more active in the term market over 2020.
Source: Mines and Metals