Where Did Kazatomprom Fumble Its Uranium?
Kazakhstan-based Kazatomprom, the world’s leading uranium miner, is encountering production hurdles that may impact its output targets over the next two years, contributing to the challenges in the global uranium supply chain.
The London-listed company, controlled by Kazakhstan’s government through its sovereign wealth fund, revealed last Friday that shortages of sulfuric acid and construction delays at newly developed deposits are posing challenges that are likely to persist into 2025. This setback raises concerns about potential disruptions in the supply of nuclear fuel amid a rebound in demand.
In a press release, Kazatomprom stated, “Kazatomprom expects adjustments to its 2024 production plans” due to issues related to the availability of sulfuric acid, a critical operating material, and delays in construction at new deposits. The company had initially planned to increase production to 90% in 2024, a decision based on successful contract signings with new and existing customers.
Despite ongoing efforts to secure critical operating materials and reagents, the challenging situation surrounding sulfuric acid in Kazakhstan and the region is evolving. Preliminary agreements with suppliers have resulted in lower-than-required volumes for 2024. The company is actively seeking alternative sulfuric acid supplies, but projections indicate that achieving the 90% production volume in 2024 may be challenging.
Kazatomprom said it remains committed to fulfilling its contractual obligations to existing customers throughout 2024. However, limited access to sulfuric acid this year and potential delays in construction works in 2024 could impact the 2025 production plan, subject to considerable supply chain risks.
The company plans to release detailed information on the exact impact on operational performance and updated 2025 production plans in its Q4 2023 trading update by February 1, 2024.
This production setback adds to the list of challenges faced by uranium suppliers globally. Last year’s coup in Niger disrupted shipments to European reactors, and key miner Cameco Corp. lowered its production targets in Canada. The surge in uranium prices to 15-year highs has been fueled by the renaissance in the nuclear industry, driven by global decarbonization efforts and energy market disruptions following Russia’s invasion of Ukraine.
The geopolitical landscape has also affected Kazakhstan’s uranium industry, with the sale of a stake in the Budenovskoye mine to Russia’s Rosatom in 2022 causing turmoil and an exodus of senior managers.
Analysts speculate on the reasons behind Kazatomprom’s challenges. John Quakes, an Earth Sciences expert, raised questions on social media, suggesting political motivations behind Kazakhstan’s push to increase its share in the global uranium market. He posits that the country, directed by its majority shareholder, Kazakhstan’s Samruk-Kazyna Sovereign Wealth Fund, aimed for a return to 100% production in 2025 despite ongoing challenges.
Trader Ferg, in a Substack post, expressed skepticism about Kazatomprom’s explanation for missing production targets, citing historical overestimations by the company and the current global sulfuric acid market conditions. He drew parallels with the shale industry and highlighted concerns raised by industry experts about the impending decline in Kazakhstan’s uranium production.
“It’s all easy with hindsight, but we obviously now know production never got close to subsoil use agreements,” the author wrote.
As Kazatomprom prepares to announce its 2023 total production on February 1, the industry awaits further details on amended production targets for 2024 and 2025. The uranium market is on edge, pondering whether Kazakhstan’s post-dated commitments will be realized or if the company is facing challenges that may impact its ability to meet future production goals.
Information for this story was found via Bloomberg and the sources mentioned within the article. 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.
I`m wondering why Kazatomprom claims not to get the required quantities of sulphuric acid. Neighboring China is the biggest market. If the sulphuric acid production in China is insufficient there is India or in the worst case Europe and North America to ship this stuff to Kazakhstan,