Cantor Fitzgerald: If Russia Retaliates Against Uranium Ban, Markets Will Go “No-offer”
On Tuesday the U.S. Senate made a significant move by voting unanimously in favor of the Prohibiting Russian Uranium Imports Act. The bill, which aims to restrict the import of uranium from Russia, will now be forwarded to the White House for President Joe Biden’s signature. The President has already signaled his approval of the legislation.
The passing of this act has drawn attention from various quarters, including financial markets and industry analysts. Cantor Fitzgerald, a financial services firm, recently issued a Uranium Macro Update, highlighting the potential implications of this legislative development.
“There is now an elevated risk that as a retaliatory measure, Russia preemptively halts nuclear fuel exports to the United States prior to the 2028 deadline covered by the temporary waivers provided for in this legislation,” the update read. “Should it occur, our best estimate is that spot uranium prices would likely gap up +20-30% and temporarily go no-offer.”
Cantor Fitzgerald’s analysis underscores the importance of this legislation and its potential impact on uranium prices and related equities. The firm views the Senate’s decision as directionally positive for uranium markets, anticipating a favorable trajectory for prices and associated investments.
Key points highlighted in Cantor Fitzgerald’s analysis include:
- Market Response: In response to the news, uranium equities experienced an intraday surge of 4-10%, largely recovering from recent losses triggered by Cameco’s Q1/24 earnings miss. This indicates a positive market sentiment towards the Senate’s decision.
- Clearing Event: Analysts anticipate that the passing of this legislation will serve as a “clearing event” for both buyers and sellers in the spot and term uranium markets. The expectation is that market activity will increase, with a subsequent impact on prices as participants gain clarity and confidence in engaging in uranium transactions.
- Russia Risk Event: There is a looming concern regarding potential retaliatory measures from Russia, including the preemptive halting of nuclear fuel exports to the United States. Cantor Fitzgerald assesses the risk of this outcome at 10-15%. In the event of such a scenario, spot uranium prices could see a substantial surge of 20-30%, leading to a temporary situation where prices go “no-offer.”
In light of these developments, Cantor Fitzgerald identifies Denison Mines, Sprott Uranium Trust, enCore Energy, and Ur-Energy as preferred investment options within the uranium sector.
Spot uranium reportedly closed up by $2.75 to $93 per pound of U3O8, marking its highest level in two months. Nuclear fuel brokers, including EvoMarkets, reported a flurry of activity with sellers asking as high as $94 per pound.
Similarly, other market players such as Numerco and UraniumMarkets saw significant upticks, with spot prices reaching $92 and $91.50 per pound, respectively.
Yellowbull, a prominent voice in the uranium market, weighed in on the significance of the Senate’s decision. He noted that while the market had anticipated a catalyst for change, the approval of the Russian uranium import ban legislation surpassed expectations.
“As I noted above, this is a massive move for the uranium market,” he wrote. “The full extent of this legislation and the aftermath of it remains to be seen, but it is certainly a big event for the sector.”
According to Yellowbull’s analysis, the legislation represents a critical step towards reducing dependence on Russian uranium imports, which currently account for nearly a quarter of America’s nuclear fuel supply. The bill’s passage underscores a strategic shift in U.S. energy policy, aimed at bolstering domestic uranium production and safeguarding national security interests.
However, Yellowbull also highlighted potential risks associated with Russia’s response to the ban: “Ah yes, the good old ‘you can’t fire me, I quit’ mantra and it is extremely relevant here… Russia knows that it can deal a blow to the western supply chain for nuclear fuel.”
Nevertheless, the consensus among industry observers is that the Senate’s approval provides much-needed clarity for market participants. With uncertainty surrounding Russian uranium imports lifted, utilities and investors alike are expected to ramp up contracting activity and investment in domestic uranium production.
“We have already seen the ASX equities react very positively to this news and there is a chance this becomes a self-fulfilling prophecy as investors flock to the sector in a ‘this is it’ moment,” he added.
Russia currently supplies 24% of the enriched uranium consumed by the United States, making it the largest supplier outside of the US. Enriched uranium is currently utilized to operate over 90 commercial reactors in the US. The dominant position by Russia, as per Bloomberg, is said to translate to an estimated $1.0 billion per year in purchases from Russia.
The approval of the ban of enriched uranium from Russia was notably a requirement to unlock approximately $2.7 billion in support for the US domestic uranium market.
The current legislation is set to expire at the end of 2040.
Information for this briefing was found via the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
Every time this Biden administration and the Democrat led senate gets involved in anything at all, it spells trouble for the entire world let alone the United States. Get rid of them all!