Spot uranium prices continue to show little change, week-over-week, and seem to have found some stability following their recent crash which saw uranium prices bottoming at $17.75 per lb in December. Now, prices have found stability in the low to mid $20s, suggesting that sell-off in uranium is over. However; the lack of a large, consistent move higher indicates that a larger fundamental change is needed to really power a rally.
Market participants have long been optimistic about the future of uranium – but it still remains a waiting game before enough, new nuclear plants are up and running to really boost demand. While demand has yet to significantly improve, the recent increase in prices is a result of supply side changes helping to balance of the market.
Oversupply has plagued the uranium market since the Fukushima nuclear disaster, but in January the market started to improve after Kazakstan, the world’s largest uranium producer, announced that it would significantly cut output. This large output cut was after many of the world’s larger uranium miners also started to curb their output. At the same time, while miners are reducing their immediate output – there are many expansions underway.
How the uranium market performs over the more near-term will depend on the balance of demand, and supply increases. Right now it seems that the two are moving in lockstep; therefore it is difficult to gauge. Grand View Research sees nuclear power use growing at 4% per year through 2022. According to Cameco, there are currently 58 nuclear reactors under production, and this means that even though the near-term outlook for uranium is murky – longer term there is a very robust demand case. Nuclear reactor operators do not purchase uranium on the spot market, instead, they lock in longer-term supplies of uranium to meet the long-term demand that nuclear reactors have. As soon as some of these reactors start to come online we will likely see an influx of new customers, and that would power a strong uranium price rally.