Uranium prices have spiked 50% this year and are set to climb further on stockpiling and risk of bans on Russia exports, Bank of America says
Uranium prices have soared 50% this year and look set to climb even more, Bank of America said Tuesday.
The risk of bans on Russian uranium imports by Western countries is contributing to driving up prices.
The investment bank raised its uranium price estimates for 2022 through 2027 by 20% on average.
The risk of Western import bans on Russian uranium supply has contributed to this year's surge in prices for the nuclear-energy element and Bank of America in adjusting its price outlooks foresees further gains.
Uranium spot prices have climbed 50% year-to-date in hitting $63.60 a pound, with most of that gain — 47% — taking place since Russia launched a war against Ukraine in late February, the investment bank said in a Tuesday research note.
Russia is a key force in global uranium supply chains, in part as makes up 17%, or an estimated 34 million pounds, of total uranium supply for 2022. In terms of uranium conversion, the country accounts for around 20% of global capacity and 29% of estimated 2022 production. In enrichment, Russia accounts for 46% of global capacity.
"To the best of our understanding, the war has not yet contributed to a direct disruption of shipments of Russia uranium products to the rest of the world. Rather, the price increase has been driven by concern about future disruption and a desire by market participants to lock in supplies in anticipation of that possibility," analyst Lawson Winder wrote.
BofA said based on reporting by industry consultancy UxC, much of the activity driving up prices has come from the Sprott Physical Uranium Trust as opposed to utilities or producers.
"However, utilities have reportedly been active in the contracting market," leading to a push higher in the monthly UxC term price indicator. The Sprott Physical Uranium Trust is the world's largest fund holding the actual commodity rather than futures contracts.
In early March, uranium prices hit their highest since Japan's Fukushima nuclear disaster in 2011. That move stemmed from reports that US President Joe Biden was discussing with the country's nuclear industry the impact of potential sanctions against Rosatom. The Russian state-owned company supplies nuclear fuel and technology to power plants worldwide and is involved in uranium mining and enrichment.
The Biden administration in March banned Russian oil and other energy products but the action didn't include uranium. Some US lawmakers have introduced legislation to ban uranium fuel imports from Russia. Bank of America noted a Reuters report that said Russia had been considering banning US uranium exports.
"Such bans would be positive for uranium," said BofA.
"With minimal direct impacts, we see upward price pressure to date as driven by risk mitigation. We expect this to continue and then accelerate should direct impacts emerge," it said. It raised its uranium price estimates for 2022 through 2027 by 20% on average, and its 2027 long-term price estimate by 4% to $50 a pound on its view of cost curve inflation. For 2022, it raised its uranium price estimate 13.5% to $60.70 a pound.
It also increased its price objective on Canadian uranium producer Cameco to $37 (C$46) from $32 and reiterated its buy rating on the company.
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