Will This “OPEC” Strategy Help Boost Uranium Prices Next Year?

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Will This “OPEC” Strategy Help Boost Uranium Prices Next Year?
anita_starzycka / Pixabay

Small but very critical item in the uranium space this week. Suggesting that the world’s largest producing nation may be about to take drastic action in propping up faltering prices.

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That’s Kazakhstan — the world’s reigning champ for uranium output the last several years. Where officials said they may move to further cut production in order to rebalance the market.

Trend News Agency quoted Kazakhstan Energy Minister Kanat Bozumbayev as saying that the country has already achieved ambitious production cuts this year. With Bozumbayev noting that countrywide output was reduced by 10% during the first 9 months of 2017. 

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The Minister added that this drop should put Kazakhstan on course for a 10% reduction in output for 2017 as a whole. Which would mean a reduction of about 2,500 tonnes of uranium (5.5 million pounds), given that 2016 production came in at 24,600 tonnes.

But the really big news was Minister Bozumbayev suggesting that Kazakhstan could cut production even further over the coming months. As he noted, “We, as responsible big producers, should keep track of the conjuncture, because it is easy to drop prices and harm themselves and partners.”

Local analysis of the Minister’s comments took this as a suggestion that production could be reduced further. Meaning we could see Kazakhstan take an OPEC-like approach in trying to reduce output to get uranium prices moving upward again.

At the same time, other news this week suggests more of Kazakhstan’s supply could be headed to a new destination: China. With Minister Bozumbayev also confirming that local producers have signed new supply deals with reactors in that country.

The Minister said that Kazakhstan will begin sending uranium to five Chinese nuclear reactors as soon as 2019. Marking one of the first major supply deals between the two nations.

That means there’s going to be more Kazakh supply tied up in long-term offtake deals — at the same time as overall output is falling. Watch to see if all of these factors will help to prop up uranium prices, which are currently languishing at spot rates near $20/lb.

Here’s to cutting them off,

Dave Forest

Article by Pierce Points

Updated on

Dave Forest writes Pierce Points Free Daily E-Letter, an advisory on mining and energy read every day by BP, Rio Tinto, JPMorgan, BNP Paribas, Repsol, GDF Suez, GE, Platts, Warburg Pincus, and the UN. Sign up for free at www.piercepoints.com. Mr. Forest has funded and managed over $80 million in global exploration and development in natural resources, and continues to design and develop projects globally. He is a professional geologist.
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