Uranium Prices Are Struggling and There’s No Relief in Sight
Oil, coal, and gas have struggled, but they recovered in 2015 and the latter half of 2016. The one fuel source that has not recovered is uranium oxide. More specifically, the kind known as triuranium octaoxide (U3O8), which is used to feed nuclear reactors. The uranium market continues to suffer and its prospects remain bearish. Prices of U3O8, which forms the base of so-called yellowcake, has been in free fall since 2011. That’s when the Fukushima disaster forced the shutdown of all reactors in Japan.
Last week, according to a survey by The Ux Consulting Company, LLC, uranium fell below the psychological threshold of $20.00lb. (Source: “Daily uranium spot price tumbles to $18.75/lb, lowest since 2004,” S&P Global Platts, November 2, 2016.)
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That’s the lowest price in 12 years. Alexander Molyneux, CEO of Australia’s Paladin Energy Ltd, says that despite everything, no one expects a turnaround in the short term. Moreover, Molyneux said that prices will most likely remain below $30.00 until 2019. (Source: “Uranium Price on the Rocks,” Investing News, November 2, 2016.)
Part of the problem is the low elasticity of uranium demand. Uranium demand relies on the number of reactors operating worldwide. China’s nuclear energy ambitions were seen as a driver of uranium demand. However, even though the new plants in China are quickly being built, it’s not enough to fully compensate for the closures.
In the U.S., it’s not so called green energy—solar or wind—that has slowed demand for nuclear energy. Rather, the success of shale gas has slowed the development of nuclear power. And in Japan—although the government has hardly forsaken nuclear energy—only two out of the existing 42 reactors are operating.
The other reason for the falling prices is the accumulation of stocks. Producers have closed or slowed production at many mines to combat the phenomenon. In addition, uranium from military arsenals has been redeployed to civilian use. In other words, stocks of uranium largely exceed what reactors are consuming. A pound of uranium oxide cost $34.00/lb at the beginning of 2016. It cost $73.00/lb before Fukushima. The peak of the past decade was in 2007, when prices reached $136/lb.
