It’s a little too early to expect model updates, but the 2023 editions of many #uranium s/d forecasts are going to be messy.
I’m expecting both secondary demand and secondary supply within the enrichment models, and both inventory drawdown and restocking depending on region.
One major thing to sort out will be how uranium inventory is distributed within the utility sector. How convergent are {Russian exposure, uncovered SWU requirements, low inventory levels}? E.g. are the utilities now signing high assay SWU contracts also lighter on U inventory?
So the West will see total uranium requirements go up ~11% if operational enrichment tails assay moves from 0.18% to 0.24%.
But if utilities with less enrichment coverage are also light on inventory - their U needs could increase 26% as their demand is less buffered by inventory
Regrettably, I don’t think we’re going to get satisfactory answers to these questions except in hindsight.
Combine uncertain enrichment math, uneven inventory distribution, unclear SMR demand, and unpredictable financial demand - error bars are as big as they’ve even been.
[I’ve been encouraged to be more explicit about my takeaways so here is the bottom line - I think this demand uncertainty is pro-cyclical. Suppliers will be less willing to part with forward supply, and utilities might increase contract coverage as a risk mitigation measure.]
• • •
Missing some Tweet in this thread? You can try to
force a refresh
@ChapmanScpa does some good work here with the information that is available to him. And here I am to offer my extra bit of colour. A few of my thoughts below:
Firstly - Chapman identified the enrichment level of some inventory (~2%) and that BWRs are wonky. Put another way - if one were to sell material, it’s easier to sell “standard assay” in the 4.X range (esp 4.95%) and harder to sell low assay odd lots.
Secondly - it is my impression that Japanese nuclear fuel accounting uses purchase price rather than mark-to-market accounting. So generally speaking Japanese inventories contracted pre-2011 are probably MORE valuable than market and may look more valuable than they actually are.
This conflates two diff things. Russia is allowed to import ~20% of the EUP used by US reactors, and it possesses 39% of the global nameplate SWU capacity.
B/c of trade barriers, TVEL produces less enriched #uranium per input SWU because much of their capacity is excess.
Europe is, on the whole, slightly more dependent on Russian EUP (and fuel fabrication services) - and Europe's Russian uranium imports policy is a recommendation unlike the US', which is law. In 2020, Russian uranium was roughly 20%, and Russian enrichment was about 26%.
In a post-Ukraine War, self-sanctioning world, it seems unlikely that the Russians will be sell any of their currently-unfilled RSA quota, so real imports will likely be less than quota in future years.
So how does a nuclear production tax credit (PTC) increase #uranium requirements? Five key areas:
1.Existing reactors stay on
2.Reactor lifetime extensions
3.Reactor cycle length extensions
4.Reactor power uprates
5.Reduced need for flexible operations
Many US nuclear reactors face periods of negative power prices which are in part driven by existing PTCs for wind & solar. With the certainty of all nuclear generation being worth at least $15/MWh, operators can more easily justify capital expenses to keep existing plants running
Especially as many reactors consider lifetime extension to 80 years – a process which will require significant preparation, upkeep, and maintenance to achieve – the PTC provides more certainty for operators in these investment decisions.
Not exactly a revelation, but the #uranium daily prices are often indicative and sometimes move on zero volume. *Literally* zero volume. And this has been true recently for small price movements in both directions.
We want a daily price, but it feels like a “data vs. information” situation. Unlike, say, a front-month oil price which carries location, specification, and timing information, uranium is fuzzy.
Spot is 15 days out? A month? A year? Price is only one datum we need to understand.
100,000 pounds U3O8 (standard volume) is 0.06% of annual requirements.
As a percentage of total volume, that’s like an oil future being 800,000 barrels rather than 1,000.
It’s not worth comparing the spaces too deeply, but a few dozen shares of SPUT is more “future-sized.”
Been a real Tale of Two Conferences for me lately - first to Montreal with the nuclear fuel buyers and sellers, and then to PDAC in Toronto with the broader mining industry and its many investors.
As far as #uranium is concerned, the vibes couldn't have been more different.
Montreal was a tense room. It's the first big get-together since the Russian invasion of Ukraine, so its implications to the world nuclear fuel market dominated the program.
What was true before is doubly true now: we need greater nuclear fuel capacities across the entire cycle.
The industry is at an impasse.
Who funds new production (esp. conversion & enrichment)? Uncertainty over future Russian deliveries prevents many buyers from going all-in on long-term contracting. But so too are many producers unwilling, warry of the recent cycle of overcapacity.