-Long-term uranium forecast price of US$60
-The long-term uranium price is trading -2% below the mid-term price
-Uranium spot price rises over 15% for the week<\/strong>
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By Mark Woodruff<\/p>\n
After trending upward since May, the uranium price has climbed the most on record for a three-week period.<\/strong><\/p>\n Over the last week, TradeTech's Weekly Spot Price Indicator jumped by US$5.20 to US$39.00\/lb. More than 3.7mlbs U3O8 involving 21 transactions occurred in the final three days of last week.<\/p>\n The total spot market volume for August was 13.2mlbs from 55 transactions. This is the largest transaction volume total recorded in a single month in the uranium spot market since 1996.<\/strong><\/p>\n A significant contributing factor in the price rise has been the mid-August launch of the Sprott Uranium Physical Trust (SPUT), notes industry consultant TradeTech. Brokerage firm Canaccord Genuity agrees and points out spot prices have risen 22% since August 17, the day SPUT launched its US$300m at-the-market (ATM) facility.<\/p>\n Not only has SPUT accounted for a significant portion of purchases since then, but also the launch of the fund has attracted a number of new parties to the uranium market, explains TradeTech.<\/p>\n Canaccord Genuity believes this cycle has a long way to go, and as spot prices rise the broker thinks utilities will likely feel increased pressure to contract supply.<\/p>\n With covid's impacts slowly passing and increasing political certainty aiding the outlook for nuclear energy, the broker can't help but feel that activity in the term market will ramp-up.<\/p>\n Shaw and Partners upgrades its long-term uranium price forecast to US$60\/lb by 2028, up from US$52\/lb<\/strong>. An incentive price environment for re-investment to occur is assumed and a multi-year price spike to US$85\/lb is forecast, before settling back to the US60\/lb level.<\/strong><\/p>\n The broker remains positive on the sector on a multi-year thematic, and its investment thesis is based on a decade of underinvestment and longer-term demand supported by increased electrification and decarbonisation.<\/p>\n As equities trade ahead of valuation support in a multi-year commodity price up-cycle, Shaw upgrades its price targets for all ASX-listed uranium companies under its research coverage. <\/p>\n The preferred exposure to an improving uranium market is Paladin Energy<\/strong> ((PDN)) and the broker raises its price target to $1.00 from $0.56. The company is considered the premium and most liquid name in the sector.<\/p>\n The broker also has Buy ratings for Vimy Resources<\/strong> ((VMY)) and Peninsula Energy<\/strong> ((PEN)) and lifts its respective price targets to $0.27 (from $0.25) and $0.30 (from $0.17).<\/p>\n The rating for Boss Energy<\/strong> ((BOE)) is raised to Buy from Hold and the analyst’s price target climbs to $0.30 from $0.17.<\/p>\n Finally, Shaw maintains its Hold ratings for both Lotus Resources<\/strong> ((LOT)) and Bannerman Energy<\/strong> ((BMN)). The target for the former rises to $0.29 from $0.16, while the broker doubles its target for Bannerman Energy to $0.28 from $0.14.<\/p>\n Uranium pricing during the month<\/u><\/p>\n TradeTech's monthly spot price<\/strong> rose US$2.25 to close out August at US$34.75, the highest level in nearly six years.<\/p>\n TradeTech's mid-term price<\/strong> indicator for August 31 is US$35.75 \/lb, up US$2.25\/lb from last month, while the long-term price<\/strong> indicator remains unchanged at US$35.00\/lb. <\/p>\n In a situation not seen since 2011, the Long-Term Price Indicator is -2% below the Mid-Term Price Indicator. <\/strong>This is indicative of both more demand for delivery in the spot and mid-term periods, as well as an expectation on the part of some suppliers today that more supply will be available by mid-decade.<\/p>\n The desire of sellers to rebuild their portfolios at a time when the spot price is on the rise, and intense competition among producers vying for utility term contracts, creates a difficult choice for sellers, notes TradeTech. This is because current term prices are already less than sufficient to cover many producers' full production costs.<\/p>\n Find out why FNArena subscribers like the service so much: "Your Feedback (Thank You)<\/a>" – Warning this story contains unashamedly positive feedback on the service provided.<\/em><\/p>\n<\/p>\n