David Talbot: Uranium Supply, Demand and Prices — What to Watch in 2022
Attention is shifting to the uranium market, with prices creeping up as supply concerns mount.
David Talbot, managing director and head of research at Red Cloud, gave his thoughts on what’s going on, focusing on the Sprott Physical Uranium Trust (TSX:U.UN) and the impact of the Russia/Ukraine conflict.
“It does seem apparent that many investors believes this Russia/Ukraine situation will lead to higher uranium prices,” he told the Investing News Network. “That said, I don’t think there is a lot of risk premium built into the current spot price. The price appreciation looks to be more a response to Sprott buying.”
Talbot noted that the Sprott trust has raised about US$100 million in the last several trading days, enough to buy more than 200 million pounds of uranium; beyond that, it is approved to raise another US$2 billion.
The trust entered the market in the second half of last year, kicking uranium prices higher. “We see there is a lot of potential (for Sprott) to go out and take another chunk of physical out of this market,” he said.
Talbot sees the Russia/Ukraine conflict as more of a wait-and-see scenario as it is fluctuating daily.
He noted that 8 percent of US electricity is generated by uranium sourced from Russia, Kazakhstan and Uzbekistan, but said he doesn’t see any immediate disruption in uranium deliveries to the US or Europe.
Payments, however, could become a potential roadblock now that Russian banks have had their SWIFT abilities curbed. Enrichment is another area that Talbot will be watching.
“I think payments for deliveries now is becoming the big concern, and that doesn’t consider whether Russia will want to supply uranium or enrichment services to the west,” he said during the interview, adding that Russia accounts for 20 percent of the enrichment needs for the US and EU.
In terms of prices, Talbot said that uranium is currently overshooting Red Cloud’s 2022 expectation of US$45 per pound. The firm expects US$50 next year, US$55 in 2024 and US$60 beyond that.
“We believe that price deck is reasonable in a normal world, and provides enough incentive for new production. However, I do think given this local spat, geopolitical uncertainty, perhaps another binge by Sprott in physical buying, with security of supply overtones we might see some risk premiums getting built into the commodity price, especially as the utilities start coming in,” he said. This could cause a rise above US$50 in the short term.
Watch the interview above for more from Talbot on uranium supply, demand and prices in 2022 and beyond. You can also click here to register for Red Cloud’s Very Pre-PDAC Mining Showcase, scheduled for March 2 to 4.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.