The uranium price remains at record lows, falling from $34.70 per pound at the start of the year to $18.50 per pound by mid-November. That’s roughly a 47 percent drop over the year, and many have been bearish on a price rebound.
Still the uranium future outlook is positive among many in the industry, even though it’s currently the complete opposite.
Understandably, it can be difficult to not get caught up in the present–especially when times have been tough–but there is a strong consensus in the sector that it’ll bounce back sooner than one may think.
Uranium future: supply/demand growing
For starters, Berkley’s Salamanca mine is expected to open in 2018 with a target production of 4.5 million pounds of uranium yearly. What’s more, it will reportedly be one of the lowest-cost uranium producers in the world.
Paul Atherley, the company’s chief executive, said in an October 2016 press release that the mine has a combination of “extremely low operating costs” of $15 per pound of uranium produced and low capital costs of $100 million.
The release goes on to say that the combination will give the industry “robust economics at the bottom of the uranium price cycle.”
“After a decade of investment, we are bringing the Salamanca mine into production at the bottom of the uranium price cycle,” Atherley said in the release. “Judging by the interest we are receiving for offtake from 2018 onwards, in particular from US and Asian utilities, it looks like we will be delivering into growing demand.
On that note, Camco (NYSE:CCJ), the largest uranium producer in Canada, projects demand will increase by 500 million pounds in the next decade, but its manager, Tim Gitzel, said contract and spot prices “have fallen to levels that are neither rational nor sustainable.”
Mining Weekly also notes, according to Cameco’s senior vice president and CFO Grant Issac, that by 2021, it is expected that 20 million pounds of uranium will have not been contracted yet.
“There’s a lot of five-year contract buying supposed to happen, but it seems buyers are taking a break, testing riskier supply chains over three- and four-year contracting runways,” he said in the article.
And, of course, the World Nuclear Association (WNA) notes that 61 power nuclear reactors are currently under construction, which will undoubtedly impact the ramp-up off uranium supply.
Uranium future: price explosion
As mentioned above, the uranium price is at an 11-year low. As supply and demand is expected to grow in the coming years, the price is also on pace for a significant boost.
Particularly, a number of analysts polled by FocusEconomics in their November 2016 Commodities Consensus Forecast are bullish on the price. The report notes panelists expect the uranium price to “slowly increase” in the medium term as demand from China, India and Russia grows.
They expect prices to average $34.60 per pound in the fourth quarter of 2016–which seems a long ways off from its current price–and pricking up to $39.50 per pound in the fourth quarter of 2017.
Experts over at Cantor Fitzgerald are of a similar mindset; in the company’s October 27, 2016 sector update, it states that they “continue to believe a violent increase in the price of uranium is coming.”
Furthermore, the company believes demand will outweigh supply, noting, “the low-price environment has choked off exploration activity for uranium and we are at the point where there are not enough uranium projects in the pipeline that can adequately meet the coming demand.”
Of course, the market is volatile, and things are always expected to change; a bullish outlook from analysts on the uranium price is, however, certainly good news for the struggling industry.
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.