The state of Energy: Uranium Market Report

Uranium has continued its long-term, downward trend on the commodities market in the first quarter of 2016. Although spot prices increased approximately 10 per cent in 2015, up to US$37 per pound, early 2016 was not kind to global miners.

Between November 2015 and mid-March 2016 the market saw a 19 per cent drop in value, from US$37 to US$29 per pound, amidst reduced demand, increased inventories and growing secondary supply.

Downward pressure is expected to continue in the short term, with the average predicted spot price of US$32 per pound expected to drop to an average of US$31 in 2017.

However, 2018 will be an entirely different story, with new nuclear power plants under construction in Russia, China and India will start to come online. This will mean a substantial increase in demand for uranium, which Resources and Energy Quarterly expects to result in increased exports, growth of 45 per cent to bring Australian exports to 9450 tonnes of uranium in 2020-21.

This increase in demand will underpin increasing prices, which will bring Australia’s uranium reports to be worth $934 million.

Of course, such rises in value and export demand will be contingent on the completion of projects, and any delays to the construction of the new power plants will slow growth in the market.

Consumption

In terms of consumption, 2015 saw the uranium increase by 1.6 per cent to 68,800 tonnes, against 67,700 tonnes in 2014. This was attributed to increase in demand driven by the completion and start-up of Korea Hydro and Nuclear Power’s Shin-Wolsong 2 reactor in South Korea and Rosatom’s Rostov 3 reactor in Russia.

Commissioning a new power plant requires more uranium than under ordinary operating conditions, in order to stock the core, with annual requirements declining as the plant reaches a steady state level of operation.

In 2016 China has 24 nuclear reactors under construction and 42 planned. Russia has eight under construction and 25 planned while India has six under construction and 24 planned.

Plants under construction around the world are primarily in China, India and Russia, where governments have taken steps to work towards policies of carbon reduced baseload electricity. In 2016 China has 24 nuclear reactors under construction and 42 planned. Russia has eight under construction and 25 planned while India has six under construction and 24 planned.

World consumption of uranium is expected to rise by 10 per cent to 75,600 tonnes, as more reactors come on-line, while it will it is projected to grow at an average annual rate of 1.5 per cent between 2016 and 2021, when consumption is forecast to reach 80,900 tonnes.

Production

Global production in 2015 increased by seven per cent to 71,500 tonnes, and that rate is expected to repeat again in 2016, bringing production to 77,000 tonnes. Supplies are being driven more and more by inventories held by nuclear utilities and secondary market supplies.

Production is expected to increase by an average rate of 2.7 per cent per year up to 2021, bringing world production to 87,600 tonnes, underpinned by production increases at CGN/Swakop Uranium’s Husab Mine in Namibia, Peninsula Energy’s Lance Mine in the US, and Cameco’s Cigar Lake Mine in Canada.

Australia

Back home in Australia, Boss Resources have announced they will target a re-opening of the mothballed Honeymoon uranium mine by 2019, with expanded operations which will also contribute to increases in global production.

Exploration and development since acquisition of the high-grade NSW mine has increased the known resource by 330 per cent, to 52.5 million pounds at 640ppm.

Quasar Resources restarted production at the Four Mile Mine in South Australia in the September quarter of 2015, and production increases at the ERA Ranger Uranium Mine and BHPs Olympic Dam gave Australia a production boost of 21 per cent in 2015-16, from 6496 tonnes in 2014-15 up to 7835 tonnes, although exports are expected to reach 8007 tonnes in 2015-16.

In the medium term, exports are expected to increase to 9450 tonnes per year, underpinned by increased volumes and long term sales contracts.

Nationwide, uranium exploration expenditure was down 8 per cent in 2014-15, taking $43.9 million in the previous year to $40.6 million.

However, exploration expenditure in Western Australia has increased by17 per cent, counterbalanced by a decrease in Queensland, caused by government policy and regulatory changes.

The start of FY15 saw the announcement from ERA that the Ranger 3 Deeps project would not proceed after parent company Rio Tinto withdrew support for the development. This was followed by advice that the Mirrar Traditional Owners would not support an extension to the mining authority, meaning the mine will be wound up in January 2021.

The South Australian Royal Commission into nuclear power and supply continues to identify new opportunities and regulatory hurdles, such as the Federal legislative prohibitions on nuclear fuel cycle industries.

With 30 per cent of the global uranium reserves located in Australia, a country which accounts for only 10 per cent of global trade (Kazakhstan produces 40 per cent), it’s clear there are significant avenues here for increased exploitation.

 

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