Blue Sky Uranium – Press: Call to triple nuclear fleet may require higher uranium prices to boost supply
S&P Global – 10/03/23
CALL TO TRIPLE NUCLEAR FLEET MAY REQUIRE HIGHER URANIUM PRICES TO BOOST SUPPLY
Scientists working in a fusion reactor. The nuclear industry wants to triple its global fleet by 2050 to help the world decarbonize, but new uranium pounds are struggling to find their way to market even amid rising prices.
Uranium prices are already at record highs thanks to low supply coupled with calls to increase nuclear capacity, but prices need to increase even further to incentivize new projects to come online.
The World Nuclear Symposium on Sept. 7 called for an “unprecedented collaboration between government, industry leaders and civil society to triple global nuclear capacity to achieve carbon neutrality by 2050 [and] achieve climate targets while still ensuring global energy security.”
The global rate of deployment would need to average 40 gigawatts per year — over six times the rate of deployment over the past decade — to reach that target, the group said.
Boss Energy Ltd. CEO Duncan Craib said while the call for more nuclear capacity was sure to boost uranium prices, new mine projects need even higher incentive prices to be economical.
Global uranium production averaged 125.4 million pounds a year in 2020-2022, dropping from an average of 149.4 million pounds annually over 2010-2019, according to S&P Global Market Intelligence data.
About 121 million pounds of uranium has been put under long-term contract year-to-date, compared with just 114 million pounds in the 2022 full year, putting 2023 contract volume on track to hit a decadelong record high, according to nuclear fuel research firm UxC LLC.
Canaccord Genuity called it an important signal that “long-term contracts are being signed at continuously higher prices.”
With the Platts-assessed spot uranium price rallying 51.8% so far this year on top of the 15% increase over full year 2022, Canaccord said Sept. 25 that current levels are “the highest term price we’ve seen in almost 11 years,” noting that “floor discussions now near spot [prices] and ceilings [over] $80/lb” for U3O8.
‘Absolute minimum price’
The Platts uranium U3O8 spot Canada price was assessed at $72.25/lb on Sept. 28, up 50% year over year and the highest in the history of the assessment, according to S&P Global Commodity Insights.
Until a couple years ago, miners pegged $60/lb as the incentive price needed for new projects to be viable, Boss Energy’s Craib said. But even then, greenfield projects needed “a high-$70[/lb]” price to be viable, said Guy Keller, portfolio manager for Tribeca Investment Partners Pty. Ltd.’s Nuclear Energy Opportunities Fund.
Now, $75 per pound is just about the “absolute minimum price” for even some brownfields projects to start production, Keller said.
Canaccord put the long-term incentive price at $80/lb for Western producers.
Delays galore
New projects have hit a string of challenges, such as Cameco Corp. struggling with production at Cigar Lake, partly due to equipment reliability issues; Peninsula Energy Ltd.’s Lance project restart being pushed back due to equipment delays; and Global Atomic Corp. flagging potential delays to its DASA project due to the coup in Niger.
“We’re starting to recognize that it’s not just price” impacting supply, Keller said. “Even ‘easy pounds’ [uranium supply] are finding it hard to come to market.
“When we talk greenfield, we need to think very, very hard about where is it, what’s the community, First Nation and government support, the ability to actually get people, materials and long-lead items to site when they need it, and the two to three years of construction before it gets anywhere near production,” Keller said.
While more mine restarts are expected in response to rising uranium prices, observers fear the structural deficit will only get worse.
Additionally, “there remains a large amount of idle uranium capacity, primarily in Kazakhstan, that could easily come back online should prices or demand be strong enough,” Kevin Murphy, director for Commodity Insights’ Metals and Mining Research, said in an email interview. “This will limit the viability of bringing on a new construction project.”
The greenfield imperative
“Greenfield projects remain imperative for the market to reach balance, many of which still face permitting, technical and funding risks,” Canaccord said.
Permitting is the main challenge, said Leigh Curyer, CEO of NexGen Energy Ltd. The company’s Rook I in Saskatchewan is among the world’s top 10 undeveloped greenfield projects, according to Market Intelligence data.
“A significant amount of time is required [for permitting] considering all technical, environmental and social aspects. Anywhere in the Western world involves seven-plus years,” Curyer said in an email interview.
The Platts spot U3O8 assessment is an offering of S&P Global Commodity Insights. S&P Global Commodity Insights is a division of S&P Global Inc.
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