BHP cautions on uranium boomlet

8th December 2017
Resources Rising Stars

Things finally look to be on the up for uranium, the world’s worst performed metal in the last six years, writes Barry FitzGerald on MiningNews.

The Fukushima disaster in 2011 and the subsequent over-supply of the radioactive stuff forced (spot) prices to plunge by as much as 85% in the last six years.

And recent spot prices of US$22/lb means all of the uranium miners remain in struggle town, even though their output is good for more than 10% of the world’s electricity generation.

But recent production cuts by Kazakhstan’s state-owned KazAtomProm and Canada’s Cameco, respectively the world’s number one and two producers, has turned sentiment for the better.

Taking a leaf out of Glencore boss Ivan Glasenberg’s book, the big two have finally acknowledged that it makes more sense to leave a big chunk of their annual production in the ground rather than sell it at a loss, particularly as they know higher prices are on the way.

Ignoring what growth the low-emission energy fuel might be able to capture by becoming the new petrol pump in the electric vehicle revolution, the uranium market is fast approaching the point where power utilities will have to start covering their long-term supply needs.

Encouraged by the current over-supply and the resultant low prices, the utilities are holding off as long as they can from covering their forward needs in the hope that when they do, they will do so at the lower levels.

But much as 80% of the reactor uranium needs of the utilities are not yet covered for 2025. So when the number one and number two uranium producers start cutting production, it is going to prompt the utilities in to action.

The expectation is that there will be more deals done in the long-term contract market which covers the bulk of consumption, and which is where prices have generally been higher than $40/lb.

Sentiment towards uranium has turned as a result.

That really got going earlier this week when KazAtomProm followed up its 10% cut for 2017 (it accounts for 40% of world mine supply) with a 20% cut for the next three years, starting next month.


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