COMMODITY Insights Bulletin - Uranium Q4, 2015 - Q1, 2016

COMMODITY Bulletin - Uranium Q4, 2015 - Q1, 2016

Uranium: The required signals are not there (yet!)

Commodity Lead, Uranium

KPMG Australia


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The market is looking for the combination of Japanese restarts, supply disruption and most importantly there has been no significant return to the long term contracting market. Stop/start progress on Japan restarts and some production curtailment has occured but no significant return to the long term contracting market as the market remains oversupplied in the short term. The long term fundamentals remain solid based on known reactor growth but the market remains in transition. 

Price outlook

  • Unlike most commodities, uranium spot prices1 increased in 2015 and averaged at US$38.3/lb, up 8 percent relative to 2014.
  • After witnessing a rise in 2015, spot prices declined by 10 percent from US$35.4/lb in Q4 2015 to US$31.8/lb in Q1 2016 as high inventories in Japan, the US and Europe reduced the short term demand while  supply continued to increase.
  • In 2016, uranium producers plan to cut production as part of their cost cutting strategy with a focus on low cost mines. It will be interesting to monitor the effects on the market of the curtailment of supply and continued deferral of production.
  • From 2018, growth in uranium demand is projected to accelerate as new nuclear power plants are completed in China, India and Russia.
  • Falling primary production and stalling of new exploration projects is expected to contribute to an increase in uranium spot prices to US$66.2/lb by 2020 . However, the industry needs uranium prices to rise above US$70/Ib for producers to induce new production.

Supply and demand


  • Global uranium supply in 2015 was driven by increased primary supply from uranium inventories held by nuclear utilities and secondary market supplies including recycled, ex-military material and other stockpiles. It is estimated that inventories held by nuclear facilities are sufficient to supplement demand for nearly seven years in China, around 5 years in Japan, 3 years in both the US and Europe. These inventory levels should be considered in light of required strategic inventory normally held by nuclear facilities.
  • In 2016, uranium suppliers are expected to shift their focus towards cost cutting, resulting in reduced global production. Producers are expected to cease production from high cost mines and similar to other commodities focus squarely on their lowest cost operations.
  • Kazakhstan has 12 percent of the world's uranium resources and continues to be the largest producer of uranium in 2015 accounting for 35 percent of total global production. Recently Kazakhstan has announced they will maintain production but may establish a uranium fund to store excess uranium until prices recover. 



  • Consumption of uranium has been driven by the development of additional new nuclear power generation capacity globally. China, India and Russia are expected to contribute to the majority of the world’s new nuclear capacity supported by energy policies encouraging generation of low-carbon emitting electricity. In 2016, China has 24 nuclear reactors under construction and 42 reactors planned, India has six reactors under construction and 24 reactors planned and Russia has eight reactors under construction and 25 planned.
  • Global uranium consumption in 2016 is forecast to increase by 9.8 percent to 167Mlbs, supported by the initial start–up of new reactors in China, increase in US uranium consumption as well as moderate output increases at existing reactors in advanced economies.
  • According to Japan Atomic Industrial Forum (JAIF), Japan must speed up the process for restarting its nuclear fleet to meet targets for carbon emissions reductions. As of April 2016, 26 of Japan’s 43 operable reactors have applied for prestart up inspections with just four granted permission to resume operations. Only Kyushu Electric Power Co’s Sendai 1 and 2 reactors are currently operating, since August and November 2015. Kansai Electric Power Company also restarted units 3 and 4 of the Takahama power plant in early 2016. However, the district court ordered the shutdown of the reactors on March 2016 in response to a petition lodged by local residents. 
  • The number of proposed nuclear reactors increased to 337 as of March 2016, compared to 324 in November 2015. The number of planned reactors increased to 173 from 165 in the same period. The number of under-construction nuclear reactors remained the same at 65.

Key developments

Ownership changes5

The total value of deals decreased to US$13.2 million in Q1 2016 from US$63.7 million in Q4 2015. The number of deals decreased to four during Q1 2016 from five deals in Q4 2015.

On April 2016, Australia announced plans to supply uranium to Ukraine for power generation.


1"Resources and Energy Quarterly", Bureau of Resources & Energy Economics (BREE), Australian Government, March quarter 2016, accessed April 2016

2The uranium market is largely driven by long-term contracts (term price), with an historical uranium market of about 200Mlbs per annum versus the spot price market that is not a liquid market, with annual volumes of about 30Mlbs.

3Resources and Energy Quarterly”, Bureau of Resources & Energy Economics (BREE), Australian Government, March quarter 2016; Uranium and nuclear power in Kazakhstan, April 2016, World Nuclear Association; Uranium projects, Cameco company website; Uranium in Canada, March 2016, World Nuclear Association, accessed May 2016.

4Resources and Energy Quarterly”, Bureau of Resources & Energy Economics (BREE), Australian Government, March quarter 2016; Japan nuclear update, April 2016, Nuclear Energy Institute, accessed May 2016.

5MergerMarket and Thomson One; Australia to sell uranium to Ukraine, April 2016, The Sydney morning herald website, accessed May 2016.

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