Uranium enters the bull market after Covid-19 reaches inventory


The price of uranium, the radioactive material used to fuel nuclear power plants, entered a bull market after another supply crunch.

Kazakh miner Kazatomprom cut production forecasts for 2020 to 10.4 million pounds on Tuesday, equivalent to 8% of global supply, on Tuesday due to government measures to curb the spread of coronavirus .

This propelled uranium prices to $ 28.70 a pound on Wednesday, up more than 20% from the March low. Such a rise since a recent trough is the common definition of a bull market. The last time the metal traded above $ 30 was in February 2019.

“The supply continues to hit,” said Justin Chan, analyst at Numis, who estimates that between 30 and 35 percent of global uranium production has been affected by virus closings, which has prompted the miners to continue using their stocks. Kazatomprom has stated that it will continue to fulfill its contractual obligations for 2020 by depleting its stocks.

The reduction in operations follows the closure of the world’s largest uranium mine, Cigar Lake, for a month and the decision of Namibia, a key supplier to China’s huge nuclear industry, to suspend all mining activity . Analysts expect these disruptions to further tighten market conditions.

The industry has been burdened by large inventories since the Fukushima disaster in 2011, which disrupted the industry as Japan and other countries such as Germany shut down nuclear power plants and canceled plans to build new ones. Analysts and investors said a drop in stocks should give further boost to sentiment.

“Before Kazatomprom was announced, we expected a £ 30 million deficit [the] the supply / demand balance of uranium, which could now reach £ 40 million, “said Alexander Pearce, analyst at BMO Capital Market, adding that the additional shortfall” will only accelerate “depletion stocks.

Kazatomprom’s decision to reduce production will also be felt by Canadian producer Cameco, who expected to buy nearly 5 million pounds of uranium from Inkai, a mine it jointly owns with the Kazakh company in southern Kazakhstan. Last year, the country accounted for more than 40% of the world’s uranium production.

If Inkai’s supply is interrupted, this could force Cameco to source replacement metal directly from the spot market or from Kazatomprom stocks.

Annual world demand for uranium is £ 150 million, 85% of which is covered by long-term supply contracts between producers such as Cameco, Kazatomprom and utilities.

Typically, purchasers of nuclear fuel for utilities seek contracts approximately two years before use. With the fall of a number of contracts from 2021, buyers are expected to enter the market this year, offering another accessory at prices.


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