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Uranium: the world's worst mined commodity

Nuclear Monitor Issue: 
Jim Green ‒ Nuclear Monitor editor

We noted in Nuclear Monitor in May 2016 that the uranium price had fallen to an 11-year low, just under US$26/lb U3O8.1 Since then, the price has fallen further, to $25 in late July.

Uranium was the best performing mined commodity of 2015 according to Macquarie Bank2 ‒ the uranium price held firm, albeit at a low level, while other commodity prices tumbled. But that was then and this is now. On June 8, Bloomberg reported that of the 80 commodities it tracked, only one ‒ carbon credits ‒ has fared worse than uranium this year.3 The spot uranium price has fallen by more than 20% since the start of 2016.4

A 31 July 2016 article in the Wall Street Journal summed up the situation:5

"The price of uranium has slumped to $25 a pound, its lowest level since April 2005, according to the Ux Consulting Co., a nuclear-fuel research firm​ that publishes weekly market prices. The fuel's value is down 27% since the start of this year and is a fraction of the $136 a pound it traded for at its 2007 peak. It is the worst-performing mined commodity this year. Other natural resources such as copper, coal and iron ore have gained year to date.

"There is plenty to fret about. In the U.S., a market awash with cheap natural gas, nuclear reactors have been closing. A few years ago, France said it would start reducing its reliance on atomic energy. China, while rolling out a broad expansion of its nuclear fleet, has built up inventories of uranium that could last more than a decade.

"In Japan, a long-awaited revival hasn't happened. The Fukushima Daiichi meltdowns in 2011 sparked protests and the shutdown of its fleet of 50-plus nuclear plants, and tarnished uranium's image globally. The government had planned to restart more than 30 reactors by 2030, and analysts had expected as many as 10 back online by 2017. Now, it isn't certain the two reactors that are operating will remain running and that the dozens of other reactors not slated for decommissioning will ever be restarted."

Nick Carter from Ux Consulting said in April that the spot uranium price could stay in the low $30s/lb "for quite some time" because supply is expected to exceed demand by 25‒30 million lb U3O8 each year from 2016 to 2019. Carter does not see a supply deficit in the market until "the late 2020s".6

Likewise, Jonathan Hinze from Ux Consulting told the Wall Street Journal that the global uranium glut is deepening with annual supply of about 200 million pounds of uranium oxide exceeding annual demand of 170 million pounds.5

Stockpiles have climbed from virtually nothing before the Fukushima disaster to more than 1.4 billion pounds now, according to Hinze.5 Thus stockpiles alone would suffice to keep the entire global reactor fleet operating for 8.3 years. China's stockpile of about 300 million pounds5 would suffice to operate its existing reactor fleet for around 20 years.

Macquarie said on July 26 that it "is increasingly difficult to see what drives uranium materially higher from here."5 According to UBS analysts, a turnaround in the market could be years off due to the slow reactor restart process in Japan and the slow pace of global nuclear expansion.7 UBS recently revised its spot uranium price forecasts, and all the revisions were downward. For 2016 the forecast is now $30/lb, down from $37/lb; for 2017, the new $32 forecast is down from $55; for 2018, the new $42 forecast is down from $60; and for 2019, the new $55 forecast is down from $60.

Seller's remorse

Commodities analyst Donald Levit notes that the average marginal cost of production is around $30/lb, higher than the current spot price, and thus "many uranium miners are currently underwater".7

Uranium producers typically sell most of their output through long-term contracts rather than the spot market, which only makes up about 20% of the whole market. However Patersons Securities analyst Simon Tonkin says he believes a number of producers have been forced to sell into the spot market recently to improve dwindling cash positions.4

This is 'seller's remorse' according to analyst and investor Marin Katusa: "I've spoken to many producers who wish they weren't depleting their resources but they aren't in a position to do otherwise. It may be because they signed contracts to finance their projects into production and had no alternatives, or they may have conventional mines where it's not feasible to decrease the labor force. ... They know they are depleting their best resources in a low-price environment. They don't like it, but can't help it. This is what I call seller's remorse."8

Enrichment underfeeding

Just as the uranium mining sector is oversupplied, so too is the enrichment sector. Platts noted in April 2016:6

"Further complicating the supply picture, uranium enrichment companies are using their extra enrichment capacity to bring an estimated 15 million lb U3O8 equivalent to the market annually by driving down their operational tails assay, according to Ruthanne Neely, UxC senior vice president of enrichment and general counsel.

"When enrichers are in overcapacity, they can "underfeed" ‒ that is, use less uranium for the same resulting enriched uranium product [EUP] ‒ and sell the excess uranium back into the market. Neely estimated that there is "over 60 million SWU in excess inventories" in the form of EUP that can be sold on the market. There is so much EUP material that finding storage space is difficult, she said. Given current requirements, she said the inventory would only be drawn down by 2028."

Kazakhstan ‒ the elephant in the room?

Reactor restarts in Japan were meant to stimulate the uranium industry ... but didn't. The end of the US‒Russia 'megatons to megawatts' program was meant to stimulate the industry ... but didn't. The global 'nuclear renaissance' was meant to stimulate the uranium industry ... but it didn't materialize. Now, some are anticipating (or hoping) that uranium production in Kazakhstan will collapse and stimulate investment and production elsewhere. Marin Katusa writes:8

"It's all about Kazakhstan, which went from virtually no uranium production 15 years ago to becoming the world's largest producer, contributing 40% of global primary uranium production. Zero to hero in less than 20 years. ...

"But what nobody is asking is this: What happens to a nation's resource production when reinvestments into the sector ‒ such as replacing wells and past production ‒ never come about because the state uses the cash proceeds to fund social programs instead? ...

"I've been writing about this phenomenon for years, and I call it the pinch point of national resource production. ... The pinch point is coming to Kazakhstan, and it will happen faster than most expect. Uranium prices have been low, and the government has been using the funds from production to subsidize its political agenda. Once again, reinvestment has been sacrificed as a result. ...

"One American executive ... stated to me he spent years in Kazakhstan working in the uranium mines, and he couldn't emphasize enough how bad the coming decline to their production will be. I like to remind people that it also happened in the US. In the 1960's, the US was the world's largest producer of uranium, and produced over 35 million pounds of uranium annually. Last year, the US produced less than 5 million pounds. That is more than an 85% decrease in production."


1. 4 May 2016, 'Uranium on the rocks; nuclear power PR blunders', Nuclear Monitor # 823,

2. Andrew Topf, 12 Jan 2016, 'Nuclear Renaissance Has Analysts Bullish On Uranium',

3. Sonja Elmquist, 8 June 2016, 'World's Worst Commodity Forecast to Rally as Uranium Miners Cut',

4. Tess Ingram, 5 July 2016, 'Uranium spot prices descend beyond decade low',

5. Rhiannon Hoyle and Mayumi Negishi, 31 July 2016, 'Japan Nuclear-Power Jitters Weigh on Global Uranium Market',

6. Bejamin Leveau, 29 April 2016, 'Uranium industry focuses on costs as supply glut continues',

7. Donald Levit, 27 July 27, 2016, 'Uranium Prices Remain Below Cost of Production, Recovery is Years Away',

8. Marin Katusa, 26 June 2015, 'The Future of Uranium: Three Major Takeaways from the 2015 World Nuclear Fuel Market Conference',