Uranium Market

Demand for uranium is expected to continue to rise for the foreseeable future. Although the Fukushima Daiichi nuclear accident has affected nuclear power projects and policies in some countries, nuclear power remains a key part of the global energy mix. Several governments have plans for new nuclear power plant construction, with the strongest expansion expected in China, India, the Republic of Korea and the Russian Federation.

There are currently 435 operable reactors worldwide, 231 nuclear reactors under construction or planned and a further 317 reactors in the proposal stage. (Source: WNA April 26, 2013)

By the year 2035, according to the joint Nuclear Energy Agency (NEA)International Atomic Energy Association (IAEA) Secretariat, world nuclear electricity generating capacity is projected to grow from 375 GWe net (at the end of 2010) to between 540 GWe net in the low demand case and 746 GWe net in the high demand case, increases of 44% and 99% respectively. Accordingly, world annual reactor-related uranium requirements are projected to rise from 63 875 tonnes of uranium metal (tU) at the end of 2010 to between 98 000 tU and 136 000 tU by 2035.

America leads the world in terms of the number of reactors but in terms of growth there are only a few reactors under construction and these are the first in thirty years. China’s latest nuclear reactor expansion plans forecast that its current fleet of seventeen reactors will have grown to number the US nuclear energy generation by 2020. When added to the growth plans of South Korea, India and the likely restart of the Japanese reactors future growth and demand clearly has an Asian flavor.

Importantly countries which are critical to the growth of the global nuclear reactor fleet – including China, India, South Korea, Russia and Japan, have all recently had elections of pro nuclear governments and face looming energy crises. While the growth of nuclear power does hinge as much on political as economic decisions, the calls for cleaner air and an end to power blackouts drown out those from anti nuclear lobbies in these growth economies.


Source CRU

Uranium Market

Secondary Supply – Megatons to Megawatts

Since 1987 the United States and countries of the former USSR have signed a series of disarmament treaties to reduce the nuclear arsenals by about 80%. Nuclear materials declared surplus to military requirements by the USA and Russia are now being converted into fuel for commercial nuclear reactors.

Commitments by America and Russia to convert nuclear weapons into fuel for electricity production is known as the Megatons to Megawatts program. Surplus weapons-grade HEU resulting from the various disarmament agreements led in 1993 to an agreement between the US and Russian governments. Under this Russia would convert 500 tonnes of HEU from warheads and military stockpiles (equivalent to around 20,000 bombs) to LEU to be bought by the USA for use in civil nuclear reactors

Highly-enriched uranium from weapons stockpiles has been displacing some 9720 tonnes of U3O8 production from mines each year, and meets about 13% of world reactor requirements. However this program which provided around 23.4Mlbs of secondary uranium supply annually has ceased at the end of 2013. Although a transitional supply contract has been agreed which will commence mid-way through 2013, even when it is ramped up to full production in 2015 will only provide US reactor’s with about half of the previous supply. Given the Megaton to Megawatts program provided about 13% of the current world uranium supply, its loss is likely to have a major impact on the uranium sector.

Source: WNA

Nuclear Power Outlook 2013 VS 2040


Source: UX Weekly 2013, ‘The Long View: Forecasting Nuclear Power to 2040’, vol.27, no.18, pp.2

All mineral commodity markets tend to be cyclical, ie, prices rise and fall substantially over the years, but with these fluctuations superimposed on long-term trend decline in real prices, as technological progress takes place at mines. In the uranium market, however, high prices in the late 1970s gave way to depressed prices in the whole of the period of the 1980s and 1990s, with spot prices below the cost of production for all but the lowest cost mines. In 1996 spot prices briefly recovered to the point where many mines could produce profitably, but they then declined again and only started to recover strongly late in 2003.

The reasons for fluctuation in mineral prices relate to demand and perceptions of scarcity. The price cannot indefinitely stay below the cost of production (see below), nor will it remain at very high levels for longer than it takes for new producers to enter the market and anxiety about supply to subside.

Uranium is primarily traded through either the spot or long term markets.

Spot market: A spot market contract usually consists of just one delivery within 12-18 months and is typically priced at or near the published spot market price at the time of the contract award. Uranium spot market delivery quantities vary from 50,000 to a few hundred thousand pounds of U3O8. Only a small portion of the world’s uranium requirements are procured in the spot market.

Long – term market: The overwhelming majority of all uranium is sold under long term multi – year contracts with deliveries typically starting one to three years after award. Long Term contracts range from two – ten years or more. To diversify market risk, both producers and utility customers maintain a mix of contract terms and pricing mechanisms in their contract portfolios. Buyers are often prepared to pay a premium for long term contract’s, compared to spot prices because they can achieve secure supply at prices that are more predictable.

While the uranium equities market has been depressed post Fukushima the general consensus is that the case for a recovery in uranium equities is strong with the looming supply deficit. This is primarily due to

  1. Japanese reactor restarts,
  2. New Chinese reactor requirement’s,
  3. The end of the HEU Megatons to Megawatts agreement
  4. Incentive prices of US$70-80/lb in the near term are required to, reinvigorate exploration progress development projects and enable developers to attain project financing

Uranium is well positioned to be the best performing commodity in coming years


Source: Bloomberg, Argonaut

Uranium Market is highly concentrated with the potential for supply disruption.

51% of production from top ten mines
64% of supply from three countries
        Kazakhstan – 37%
        Canada – 15%
        Australia – 12%
50% of global production supplied from State Owned Enterprises (SOE’s)
50% of supply from higher sovereign risk countries.


Source WNA 2012