Uranium Outlook 2019: Supply to Fall, Demand to Rise - Prices to Jump?

Energy Investing
Uranium Investing

2018 was an eventful year for uranium, but what’s the uranium outlook for 2019? Experts weigh in on supply cuts, rising demand and more.

Uranium fared much better in 2018 than it did in 2017. Although prices started the year slowly, even experiencing a slight fall in January, they have grown steadily since March.

The U3O8 spot price was at US$29.10 per pound as of November 26, up US$1.55 from October’s price of US$27.55, and up US$7.30 from January’s US$21.80. Dwindling stockpiles are likely behind the incremental price growth uranium has experienced in the second half of 2018.

“Seven years of oversupply since the Fukushima incident finally resulted in production cuts from the world’s largest uranium miners in Kazakhstan and Canada,” said Mercenary Geologist Mickey Fulp.

He added, “removal of excess mine supply from the market has resulted in a 40-percent jump in the spot price since April.”

Read on to learn more about what market watchers think will happen to uranium in 2019. You can also click here to read about key uranium trends in 2018.

Uranium outlook: Price movement to stay positive

In December 2017, the U3O8 spot price sat at US$22.32, and many analysts were predicting that 2018 would be the year for the uranium market to recover ground lost since 2007’s high of US$136.

A brief drop in January and March kept sentiment in check, but since slipping to US$21.30 in March, the U3O8 spot price has gradually grown — as mentioned, it’s up 40 percent since Q2.

This stable price growth is expected to continue into Q1 2019. When asked at this year’sNew Orleans Investment Conference if 2019 will be the long-awaited year of uranium, Lobo Tiggre, CEO of Louis James LLC, suggested that 2018 has already been the energy metal’s year.

“Uranium has been going up and down, but up more than down. And I think that’s very important,” said Tiggre. “My technical friends tell me that this is exactly what we want to see — carving out a bottom where we have a series of higher highs and lower lows.”

IsoEnergy (TSXV:ISO) President and CEO Craig Perry sees depleting global stockpiles as one of the main reasons prices should advance in 2019.

“The spot market looks like it is set to continue to tighten, and with very strong demand from Cameco (TSX:CCO,NYSE:CCJ) and financial entities we can expect much higher uranium prices that are sustainable,” said Perry.

“Based on the inbound inquiry we are seeing from investors, and particularly major US and global funds, we think equities valuations are set to perform very well.”

Uranium outlook: Supply to fall 

Although uranium performed well throughout 2018, its momentary price drop early in the year along with prolonged production cuts left many still cautious about the future of the energy metal.

In late 2017, Kazakhstan, the world’s top-producing uranium country, announced it would cut production by 20 percent over three years. This output reduction was further exacerbated this year, when Cameco announced it wouldindefinitely close its McArthur uranium mine and Key Lake mill located in the Athabasca Basin region of Saskatchewan.

“We had expected more significant uranium mine production cuts, and we have now seen this with the cuts being very significant — particularly the closure of Cameco’s Macarthur River, which in oil terms would be akin to Saudi closing off all its taps,” noted Perry. “What we hadn’t expected was that the demand side would pick up considerably — and this is now happening in a major way.”

While decreased production by the largest uranium country and the largest uranium mine has helped the U3O8 spot price rally, demand from the nuclear sector is also driving once-weak prices higher.

“I believed uranium prices would start to improve due to all the belt tightening by Kazatomprom (FWB:0ZQ) and Cameco,” said Stephen Roman, president and CEO of Global Atomic (TSXV:GLO). “We hit the lows and now the rebound is starting. The Chinese reactor builds are in full swing, and reactor development around the world is increasing as we need base-load, carbon-free electricity.”

Growing reliance on nuclear energy to power cities, submarines and fuel space travel will likely contribute to enhanced demand into the next decade. However, as Alex Holmes, CEO ofPlateau Energy Metals (TSX:PLU), pointed out, “I think we’ve seen a rapid rise in the uranium spot price, [and] we may see it soften first before it continues to strengthen.”

“For this uranium market to continue in strength, we need to see term contracts signed by major utilities. This will be a strong reinforcing signal that the market rise will continue, [and] I anticipate term prices will be locked in much higher than spot today,” he also noted.

Uranium outlook: Demand to increase

With demand for uranium projected to rise, more countries are trying to get in on the action.

In October, the Minerals Council of Australiareleased a report calling on the country to relax its uranium laws in order to spur on exploration, discovery and production

Across the ocean, US-focused uranium producers asked the US government earlier this year to allow for increased production within its borders.

As Fulp explained, in late January, “Energy Fuels (TSX:EFR,NYSEAMERICAN:UUUU) and Ur-Energy (TSX:URE,NYSEAMERICAN:URG) [requested that] the US Department of Commerce requir[e] 25 percent of domestic uranium demand be supplied from US mine production.”

In July, the Department of Commerce agreed to look into the matter.

Energy Fuels Vice President Curtis Moore discussed the events following the petition launched by his company, which could result in trade quotas and tariffs on uranium imports into the country.

“We are extremely proud of the fact that this is actually the first time in our nation’s history that the US government initiated a 232 investigation upon the petition of a private company,” said Moore. “Upon receipt of the Commerce report, the president will have 90 days to enact a remedy.”

Its likely the American leader will agree to the petition’s request.

“If granted, this means that US uranium production would have to rise from about 1 million pounds per year to about 12 million pounds per year. And this will require uranium prices at levels that support those levels of production,” Moore said.

The price point that uranium producers are referring to is the US$50 to US$70. At this mark, exploration and production should be reenergized globally, and Cameco could potentially restart the McArthur mine.

When the largest uranium producer in Canada decided to shutter its project, it simultaneously became one of the biggest uranium buyers, looking to buy on the spot market to fulfil its contracts.

Add to this the addition of a number of uranium funds, and it’s easy to see why a potential supply crunch could be on the horizon, especially if stockpiles dwindle before prices can hit an attractive threshold.

“These are all indications of a market that is severely out of balance, and we believe it is only a matter of time before the market corrects to the true value of producing a pound of uranium at more sustainable levels,” added Moore. “We saw this upside correction starting in in 2018, and it could accelerate in 2019.”

These conditions, plus Japan’s growing uranium needs, are factors that will contribute to uranium’s performance in the next calendar year.

According to Fulp, the 2019 uranium market will be punctuated with, “a continuing increase in the spot price; higher demand as new reactors come online and more Japanese reactors restart and US utilities begin to enter the market for long-term contracts.”

For Nick Hodge, founder of the Outsider Club, the future of uranium is dependent on utilities and enticing spot prices. “Look, you ain’t seen nothing yet,” Hodge said at the New Orleans Investment Conference.

“You still need US$60, US$65, US$70 uranium to make money, and we’re just not there yet. I think at some point it’s going to be like getting hit by a freight train when the utilities come back into the market, a very rapid ascent. Everybody keeps saying 2019, 2020 — but for now it seems the utilities are content to buy in the spot market.”

Uranium outlook: Company perspective

Favorable spot price movement wasn’t the only development in the uranium space throughout 2018. A number of uranium-focused companies advanced projects, made discoveries and saw share price increases over the year.

Global Atomic completed a 2018 drill program at its flagship DASA project in Niger, returning results that have substantially impacted the size and economics of the project.

“We also released the first preliminary economic assessment on the project that shows viability to proceed with development even at current uranium prices. This is a standout project,” said Roman.

IsoEnergy saw its share price grow off of the strength of its latest exploration.

“Our discovery of high-grade uranium at our Larocque East property is the highlight,” Perry explained. “This saw our share price jump from around C$0.27 to around C$0.40.”

In addition to successfully petitioning the government, Energy Fuels was added to the Russell 3000 Index, an elite list of America’s top companies.

“Once on the index, a number of larger funds and larger investors started showing significant interest in Energy Fuels’ stock, which we believe influenced our share price,” pointed out Moore.

Energy Fuels also restartedvanadium production at its Utah-based White Mesa mill in during the third quarter of 2018.

Meanwhile, Plateau Energy Metals made a significant discovery outside the uranium sector. The company discovered a largelithium deposit in the same land package as its ongoing uranium project in Peru. Within eight months of discovering the battery metal, Plateau was able to advance the project.

“It is almost unheard of to be able to rapidly advance to a first resource, but in particular a very large resource, at that pace,” said Holmes.

Uranium outlook: Stocks to watch

Moving into 2019, the spot price of uranium is likely to continue its paced growth well into the new year.

“I think Louis James mentioned that uranium was exciting, and even Brien Lundin might have echoed the sentiments as well,” said Hodge in New Orleans. “I’ve been [saying] for a year and a half that uranium prices are going to rise, and uranium prices have been starting to rise for a year and a half now.”

Market commentator Fulp offered his list of uranium stocks to watch, which includes Azarga Uranium (TSX:AZZ), Uranium Energy Corp. (NYSEAMERICAN:UEC) and Energy Fuels, all companies he owns shares in. 

As the saying goes, a rising tide lifts all boats, and the rising U3O8 could also have a positive effect on many of the stocks within the uranium space. Time will tell in 2019.

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: Energy Fuels, IsoEnergy and Plateau Energy Metals are clients of the Investing News Network. This article is not paid-for content.

The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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