After surging 34 percent in March and April, the U3O8 spot price slowed down in May, only adding 2 percent over the four week period.
Rapid value growth during the first months of 2020 has moved the energy fuel 37 percent higher from its January price of US$24.63 per pound. The upward momentum has excited market participants as the space has largely stagnated since the Fukushima nuclear disaster in 2011.
The current U3O8 spot price is US$33.50, a slight slip from the end of May’s US$33.93 value. Much of uranium’s rise has been attributed to production stoppages in response to COVID-19, but previous scalebacks in production from large miners have also helped move the U3O8 spot price along.
NFWG report provides sector momentum
Aside from those factors, the release of the US Nuclear Fuel Working Group’s (NFWG) report on uranium earlier this year has helped propel the uranium market forward somewhat.
The NFWG was born last summer out of a Section 232 investigation into uranium imports. The group’s report puts forth a concrete plan for the US to build a strategic uranium stockpile, to be funded with US$150 million worth of U3O8 annually for a decade.
America’s decision to build a surplus served to highlight the growing importance the energy fuel will play in the future. Presently, some 440 reactors supply 10 percent of global electricity supply.
This is the same number of operating reactors that were active before the Fukushima meltdown.
There are an additional 50 reactors being built, with plans for more reactors being discussed, as well as various models of small modular reactors.
The widespread progress of the nuclear sector — which boasts operations in 30 countries — is estimated to be valued at US$500 billion to US$740 billion over the next decade. Those are numbers that uranium expert Nick Hodge believes will help reshape the narrative around the sector.
Referencing the NFWG report and the growth of the nuclear market that it projects, he said, “(It’s) just going to raise the profile of the uranium and nuclear sector overall.”
Hodge continued, “You know, using (the NFWG report) as an infrastructure program and touting the benefits of it and allowing it to be embraced by environmentalists and politicians is going to be good overall for the sector, which is going to be good for investors, obviously, coming out of a bear market and really off the bottom.”
Uranium market awaits COVID-19 restarts
Despite experiencing less movement over the last month the U3O8 spot price still holds upside potential, with supply shortfalls and reduced output expected to be beneficial.
In late April, Philip Johnson of UxC forecasted a total production decline of 13.1 million to 17 million pounds for 2020. That’s a roughly a 9 to 12 percent decrease from the firm’s original projections.
Hodge, who is founder of the Outsider Club, noted that all the recent activity in the uranium space is positive for juniors, which have been finding the market challenging with the spot price below US$25.
“We have already seen the spot uranium price go to US$33, so projects just inherently become more attractive, more economic, with better rates of return, as the price of underlying commodity rises,” explained Hodge during an April interview.
With COVID-19 restrictions gradually becoming more relaxed, the sector is awaiting restart news from players such as Cameco (TSX:CCO,NYSE:CCJ).
In mid-May, the world’s largest publicly traded uranium company reported commencing operations at its Port Hope conversion facility’s UF6 plant and its Blind River refinery. However, Cigar Lake, the company’s largest mining asset, will remain shuttered until further notice.
Last week, news that Kazakhstan plans to sell a 4.5 percent stake in Kazatomprom made headlines. Kazatomprom is the world’s top uranium miner by volume, producing 22,800 tonnes last year alone.
In 2018, the Kazakh company produced 41 percent of all global supply. Kazakhstan’s stake is expected to sell for US$150 million.