Market Outlook for FY-2013
Energy Fuels continues to anticipate uranium market improvement in FY-2013 and into FY-2014. Long-term demand fundamentals within the uranium sector remain strong. China, Russia, India, the U.S., the UK, Saudi Arabia and Brazil continue to develop nuclear power plants. Globally, there are now 65 nuclear reactors under construction, and 484 nuclear reactors are planned or proposed (versus 64 and 483, respectively, in the last quarter), as reported by the World Nuclear Association. Below are descriptions of some recent uranium market announcements:
- In December 2013, Japan elected the pro-business/pro-nuclear Liberal Democrat Party in a clear-cut majority. There was an immediate bump in the spot price of uranium after the election, as the new leaders provided clear direction that several more reactors are expected to be restarted during 2013. There are also indications that nuclear power will continue to be part of Japan's long term energy mix. - Germany has publicly stood by its exit from the nuclear community, while purchasing nuclear generated power from France across the border, and significantly increasing coal generation, both at increased costs. - On the supply side, the discontinuation of the US-Russia highly enriched uranium ("HEU") agreement in December 2013 appears certain. This could remove as much as 24 million pounds of uranium from World supplies. In addition, the delay of several very large, new uranium development projects could constrict uranium supply over the medium- to long-term. Globally, reactor demand for U3O8 is currently about 175 million lbs. annually to supply just the currently operating units. Primary uranium production from operating mines is about 142 million lbs. annually. The 33 million lb. gap is filled with secondary supplies drawn from various inventories around the world, including the 24 million pounds from Russian HEU. - Nuclear reactor "new-build" activity remained firm throughout the market disruption caused by the natural disaster at Fukushima. The 65 reactors now under construction will generate almost 33 million lbs. per year of new demand for U3O8, and should all 484 reactors currently planned and proposed be constructed, that will more than double the current annual global demand for U3O8. However, the depressed U3O8 price since Fukushima has not only caused the delay of major announced uranium mining projects, but has also impeded the development of new mining projects worldwide. - On January 14, 2013, it was announced that ARMZ Uranium Holding Co. ("ARMZ"), an affiliate of a Russian state-owned uranium mining company, is seeking to take Uranium One Inc. ("U1") private. ARMZ currently owns approximately 51.4% of U1. ARMZ bid $2.86 per share (which, at the time of the announcement, was a 32% premium to the 20- day weighted market average) for the 48.6% common shares of U1 that they don't already own. It has been suggested that his transaction could divert Kazakh production to Russia and further limit the global availability of uranium. Russia itself has 33 reactors currently in operation, ten more under construction, and 44 planned or proposed. Energy Fuels believes the timing and nature of this transaction could also signal a market bottom for uranium.