On Friday the Trump administration finally ruled on the Section 232 petition made by two US based uranium miners, UR Energy and Energy Fuels.
The two miners had petitioned the US government for some type of relief due to the fact that they believed that foreign miners primarily in Kazakhstan and Russia were dumping low cost uranium onto the world market in a bid to take market share away from smaller miners like themselves.
The two petitioners made the point that they considered this a national security issue as the US gets 20% of its electricity from nuclear power yet imports 95% of its uranium fuel.
Besides electricity the US has a large nuclear navy that requires uranium fuel for the ship’s onboard reactors which are used for propulsion.
The White House issued a memo on this matter late on Friday which can be read here and I have included some snippets below.
The Secretary found and advised me of his opinion that uranium is being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States as defined under section 232 of the Act. Currently, the United States imports approximately 93 percent of its commercial uranium, compared to 85.8 percent in 2009. The Secretary found that this figure is because of increased production by foreign state-owned enterprises, which have distorted global prices and made it more difficult for domestic mines to compete.
At this time, I do not concur with the Secretary’s finding that uranium imports threaten to impair the national security of the United States as defined under section 232 of the Act. Although I agree that the Secretary’s findings raise significant concerns regarding the impact of uranium imports on the national security with respect to domestic mining, I find that a fuller analysis of national security considerations with respect to the entire nuclear fuel supply chain is necessary at this time.
Establishment of the United States Nuclear Fuel Working Group. (a) I agree with the Secretary that the United States uranium industry faces significant challenges in producing uranium domestically and that this is an issue of national security. The United States requires domestically produced uranium to satisfy Department of Defense (DOD) requirements for maintaining effective military capabilities — including nuclear fuel for the United States Navy’s fleet of nuclear-powered aircraft carriers and nuclear-powered submarines, source material for nuclear weapons, and other functions. Domestic mining, milling, and conversion of uranium, however, while significant, are only a part of the nuclear supply chain necessary for national security, including DOD needs.
The two petitioners saw their stocks pummeled on this news. Yet foriegn producers in Canada and Australia rallied on the news.
However, I think this is bullish for the uranium sector for the following reason. The utilities that need uranium have been holding off signing long term supply agreements until they knew the outcome of this petition.
They did not want to be in the position of signing a long-term uranium supply contract with a foreign entity and then be told by the US government that they needed to buy a certain percentage of US uranium production.
This memo has now taken a large part of uncertainty from the uranium market as fuel buyer can buy from whomever they want.
Markets hate uncertainty and this not knowing what would happen was causing stasis in the market.
Look the Trump administration is a proponent of nuclear power. They don’t want to see the Chinese and Russians run away with the world nuclear market.
I suspect we will see additional directives and support from Trump for the US nuclear industry in the future. That is why they are setting up a working group to do this exact thing.
I just believe they did not think favoring two small companies in the US was the answer to the overall issue.
I think the focus for people interested in the potential of a recovery in uranium prices is to think on four key questions.
Is demand for uranium increasing? Yes.
Is the supply of uranium increasing to meet this demand? No.
Is the price of uranium high enough to stimulate new resources being brought online to meet growing demand? No.
Does the current price of uranium affect utilities wanting to purchase it? No. The price of a nuclear plant is in the billions. Utilities will pay any amount to keep that large investment running.
Now that the fog of uncertainty has been lifted, I think the fundamentals of the uranium market can now assert themselves and we will finally see the emergence of the long waited for bull market in uranium.
There is no bull market like a uranium bull market. This train is just now loading before leaving the station.
And the two producers that got shelled on Friday. If uranium goes where I beleive it is going over the next several years they will should recover and do fine.
To your investing success,
John Polomny
Editor
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