Geopolitical factors continued to play a major role in 2023 as Russia’s war in the Ukraine raged on while concerns about future uranium production levels and sources contributed to several of the price movements within the year. The coup d’état in Niger last July added new questions about uranium supply, not only for 2023, but going forward as well.
Other adjustments to production levels and dwindling secondary supplies reflected that additional U3O8 supply tightness could appear in 2024 and 2025. With this shift in views, not only did utilities step in to firm up term coverage and increase spot purchases, but financials also took a deeper look into the uranium market. The spot price subsequently firmed up through the first three quarters of the year. Later in the year, demand strengthened as new parties entered the spot market seeking to alleviate concerns of further supply/demand tightness heading into 2024. As a result, the spot price reached $60 per pound on the last day of August and $91 through year-end, representing a dramatic 90% increase for 2023 and its highest level in more than 15 years (since August 2007).
In 2023, total annual spot volumes reported by UxC were around 56.3 million pounds U3O8e, down 8% from last year, due to lower investment fund buying, a continuation of lower producer and junior minor buying, and the decline in non-U.S. utility purchases as the spot price continued to rise.
With the sustained new higher spot price range, the term indicators increased steadily from $52 per pound to $68 during 2023, achieving their highest level since 2012. The overall long-term contracting volume increased by 40% from 2022’s 114 million pounds U3O8e to 2023’s 160 million, the highest since 2013.
Namibia is now the third largest primary producer of U3O8 globally, after Kazakhstan, which continues to dominate the market from a supply side, and Canada. Rӧssing contributed approximately 4.5% to world primary production during 2023.
Market outlook
Uranium demand was significantly hampered in the decade following the Fukushima accident in 2011. However, times have changed, and nuclear power is gaining popularity. Several drivers have contributed to the widespread promotion of nuclear power in the last three years, including the need to reduce global carbon emissions and a desire to enhance energy security, particularly in the wake of Russia’s invasion of Ukraine.
According to UxC, there are now 433 operable units with roughly 392 GWe in capacity in 32 countries, as of early December 2023. Under UxC’s base case scenario, it is anticipated that global nuclear energy will reach 34 countries with 470 reactors (~441 GWe net) in 2030, and 35 countries with 532 reactors (~504 GWe net) in 2035. In the forecast scenario, most of the growth by 2035 is anticipated to come from Asia (especially China); however, sizeable nuclear gains are also envisioned in Eastern Europe and Africa and the Middle East.
Secondary demand from financials has been a major factor in not only driving up spot and term uranium prices, but also eliminating supply in the spot market. Over the last five years, fear is rising that primary production will not expand fast enough to keep pace with the tectonic shifts reverberating throughout the uranium market. While there are new mine projects that appear quite promising, investment decisions are needed to proceed even in a rising market environment.
Marketing our product
In 2023, Rössing produced 6.4 million pounds of U3O8 and sold 6.9 million pounds of U3O8. Around 1.8 million pounds were shipped to western converters and sold to customers in North America, Asia (excluding China) and Europe, Middle East and Africa (“EMEA”). A total of 3.7 million pounds were shipped and sold to China. An additional 1.4 million pounds were sold to non-utility customers (traders and funds) on the spot market, capitalising on the sudden price spike during the year. Rössing has benefited from the spot prices under CNNC sales arrangement.
While the operation has boosted its resilience through various capital projects to ensure its ability to deliver on contractual obligations, our marketing approach has also adopted an appropriate allocation between future contractual and spot exposure to capture higher price. The marketing team will further strengthen the communication with potential buyers of uranium and try to commit more sales on the market, adding to the longer-term sustainability of the operation.