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I don’t mean to inundate you with uranium updates…but it would be inappropriate not to discuss the metal that jumped 13% in the last week. I added that jump in green on the chart below because it’s very hard to get a uranium price chart with the most recent week’s data.
It’s important to remind that there is almost no speculative action in the uranium spot price. Several mainstream metals have futures markets and leverage options and the like, all of which create speculative pressure on the price (in whichever direction).
Uranium has none of that. Yellowcake is traded by appointment – literally. All of the buyers and sellers know each other and each deal is negotiated between two parties. The parties then report their deal terms to the two groups that calculate the spot price (UxC and Trade Tech). So the spot price simply represents the price at which transactions are taking place.
Why did the spot price jump so much in the last week? Because Kazakhstan, which produces 40 to 45% of the world’s uranium, admitted that it will not produce as many pounds as it guided this year and probably won’t manage it next year either.
The big challenges are limited availability of sulphuric acid (Kazak uranium is all in-situ recovery, which relies on acid) and delays in getting two new deposits ramped up. Neither issue is a surprise to those who follow uranium closely. It’s been apparent for a year that KAP wasn’t spending enough developing the wellfield at the giant Budenovzkoye mine for it to produce 8 million lbs. in 2024.
KAP will release more details on its shortfall on its quarterly conference call “on or before February 1st”. Uranium investors will be watching to see if KAP thinks it will produce enough to meet its contract obligations (it had forward contracted much of Budenovzkoye’s output). If not, KAP may have to buy in the spot market…where there is very little available.
A week later Cameco will report its Q4 numbers and there is good reason to believe they will not have met guidance last year.
The uranium market is tight and getting tighter, with the inventory overhangs that long persisted at US and European utilities well down and the remnants not available for sale. There are a lot of utilities that need to get their hands on yellowcake over the next few years, there are only a few projects getting into production (and they are the ‘easy pounds’, as in mine restarts and ISR situations), and the uranium price will have to stay significantly elevated for several years to get new ‘hard pounds’ into production (new hard rock mines).