Interview with Dustin Garrow, Uranium market expert and consultant
Recording date: 19th January, 2024
The uranium spot price has risen dramatically from below $50 in early 2023 to around $106 now. However, term contracting prices continue to lag behind and need to increase significantly to incentivize new mine development. Major producers like Cameco and Kazatomprom are facing delays and difficulties in ramping up production. Supply from Africa and the US also faces significant obstacles.
On the demand side, utilities have gotten used to very low prices over the past decade, paying only $43/lb on average since 2011. After decades of oversupply, the uranium market now faces critical underinvestment on the production side. Restarts of idled mines are nearing an end, with focus shifting to higher-cost and technically challenging greenfields projects often run by inexperienced management teams. This introduces new risks that could further delay supply growth.
With high-cost Russian and African supply increasingly going to Russia and China due to their strategic investments, Western utilities face more limited contracting options. However, their contracting activity continues to lag demand growth. Term prices likely need to be in the $75-80/lb range currently to incentivize new Western mines. But utilities have been resistant to accept such increases after a decade of low prices.
Long contract settlement lags mean utilities can delay the impact of higher prices on their books by 3-5 years. But without more contracting, project development will stall and availability shortages could start forcing reactors offline by the end of the decade, accelerating nuclear's decline. SMRs also face fuel supply issues already. Utilities must sign more long-term contracts soon to prevent a supply crisis. But producers also don't want to lock in too low prices before the market potentially moves higher, adding to the standoff. Overall the market is entering an exciting early stage where significant further upside in uranium prices seems likely over a multi-year period.
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