Are uranium prices making a comeback?

Uranium, the silvery radioactive metal, is a very important element because of its use in generating electricity in nuclear power stations. As the world moves on from the Fukushima disaster, nuclear power may be making a comeback and consequently, so may uranium prices. Nonetheless, the price is currently down around 25% from the same time last year having plummetted over 40% in 2016 according to a report by Frik Els of Mining.com. A uranium supply glut and falling demand along with negative sentiment based on a series of events in early 2017 has kept the price low, but analysts are becoming bullish on the medium and longer-term outlooks for uranium despite the metal still technically in a bear market.  

Click on the image to see a larger version

In January, Kazakhstan, the world’s largest producer, announced that it would cut production by 5.2 million pounds in 2017, which amounts to 3% of global production. The decision was welcomed by markets as a necessary measure to ease the ongoing supply glut. However, a series of events, including Japanese utility Tepco’s cancelling of a key uranium supply contract with Cameco Corp. and the U.S. Department of Energy’s decision to cut uranium dispersion into the market, dampened the enthusiasm following Kazakhstan’s announcement. Nonetheless, Uranium prices have recovered moderately at the outset of Q3 after declining in the preceding quarter. On 7 July, uranium traded at USD 20.1 per pound, which was up 4.4% from the same day in June. The price was 0.7% lower on a year-to-date basis and was down 24.2% from the same day last year.

The recent see-saw in uranium prices is a result in part from traders’ wait-and-see approach given the complex supply and demand dynamics of the commodity. As mentioned previously, the short-term outlook is bleak with the market oversupplied and demand weak, but the longer-term outlook is more promising. The decision of Kazakhstan to cut output as well as the world seemingly moving on from the Fukushima disaster with nuclear reactors becoming operational around the world bodes well for the future. 

Uranium Price Outlook 2017 & 2018

Demand is expected to firm up on the back of favorable supply and demand dynamics. New nuclear facilities are expected to become operational in the coming years and substantial output curbs will contribute to reducing the supply glut in the market and push prices higher. FocusEconomics projects that Uranium prices will average USD 25.9 per pound in Q4 2017 and USD 28.4 per pound in Q4 2018.

For more analysis and price outlooks for 33 key commodities look no further than the FocusEconomic Consensus Forecast report. You can download a sample by clicking on the button below.

Date: July 19, 2017