December saw Japan adopting a nuclear policy which will restart the country’s nuclear fleet, extend ageing reactors operating life beyond the current 60-year limit and build new ones.
Also in December, the Indian government approved five new nuclear plants and announced financing for ten as part of the country’s goal to triple its reactor fleet over the next decade.
The US strategic uranium reserve also awarded its first contracts and while the volumes are not material, the prices paid by the US for the uranium were as high as $70 per pound:
“Given that current spot prices are approximately $50, we believe that this excess price paid for U.S.-origin material reflects the growing concerns by the U.S. Department of Energy about continuing to rely on Russian and other non-friendly countries for critical supply chains.”
Even though there are no official sanctions on Russian uranium, the country’s dominance of conversion and enrichment with 27% and 39% respectively of the globe’s capacity saw prices for uranium conversion and enrichment services more than double in 2022.
“We believe this upward price pressure will cascade down to the uranium spot price in 2023,” says Sprott.
Sprott, which runs a physical uranium trust (TSX:U.UN/U.U) holding just shy of 60 million pounds at the end of last year, expects the restart of the US conversion facility ConverDyn in the first half of to boost “an industry shift from underfeeding to overfeeding which should significantly increase uranium demand in 2023 and beyond.”
Sprott points out that even after the runup, the current uranium price “still remains below incentive levels to restart tier 2 production, let alone greenfield development.”
“Over the long term, increased demand in the face of an uncertain uranium supply may likely support a sustained bull market.”
