Uranium prices should continue "measured increase" to US$70 by 2023: BoA

The rising support for nuclear energy and tight supply could see uranium spot prices return to US$70/lb by 2023, according to Bank of America (BoA).

“We think uranium prices should continue a measured increase, peaking around US$70/lb in 2023e, vs. spot at US$49.5/lb. However, any loss of Russian supplies would make us more bullish,” said BoA analysts last Friday. 

Uranium spot prices (Source: TradingEconomics)

In 2021, imports from Russia and Kazakhstan hit an all-time high of 22.9m lbs or 49% of total deliveries. “Given Russia’s invasion of Ukraine, we wonder if this might not swing back in favour of US allies (Australia, Canada, etc.),” the analysts said. 

Uranium spot markets became an increasingly crowded space last year thanks to financial market participants such as Sprott’s Physical Uranium Trust. According to BoA, US utility spot market purchases fell to 19% of 2021 total purchases, compared to 24% in 2020. 

“This is interesting as a decline in utility spot market activity is often correlated with higher prices. It is also positive for producers that can help fill the gap via new supply contracts,” the bank said. 

Despite the bullish backdrop, BoA does not expect a “2003-2007 style super-bull market”, where prices rallied from US$10 to US$140. Analysts said that US utilities companies, which account for around 28% of global uranium consumption, are less complacent today than in 2003. 

Data from the US Energy Information Administration (EIA) shows US utility uranium inventories stabilising and still above 2003 lows. Future anticipated uranium needs fulfilled by supply contracts sits at 50%, and above historic averages of 42%.

Source: Bank of America Global Research

BoA also has its eyes on California's Diablo Canyon nuclear plant, which is scheduled to shut down in 2024. California's governor, Gavin Newsom has expressed interest in extending the life of the state's only nuclear plant, which accounts for nearly 10% of the state's total energy production.

The Diablo plant is excluded from BoA demand forecasts and an extension could raise 2025e global demand by 1.2m lbs or 1.0%.

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