Back in February, when Biden instituted a wholesale ban on Russian energy exports, he explicitly carved out Russian uranium suppliers for the simple reason that the US is very much reliant on Russia for its nuclear power plant needs – after all, Russia is the third-largest source of U.S. uranium, accounting for about 16.5% of total U.S. uranium imports in 2020 and 23% of the enriched uranium needed to power US commercial nuclear reactors.
This prompted us to ask back on March 9 whether Putin would place enriched uranium on the list of banned Russian exports, and why Uranium stocks soared late last week after U.S. Energy Department signaled more aid for current and future nuclear reactors.
One month later, the thorny issue of Russian uranium supply again came to a head when Russia news agency TASS cited deputy prime minister Novak, who said that Russia is considering a ban on Uranium exports, although it never pulled the plug (at least not yet).
Fast forward to today when we now learn that the Biden admin is hoping to remove Russia's critical leverage to throttle US nuclear power, and is pushing lawmakers to support a $4.3 billion plan to buy enriched uranium directly from domestic producers to wean the US off Russian imports of the nuclear-reactor fuel, according to a person familiar with the matter. Shares of uranium companies surged.
According to Bloomberg, DOE officials met with key congressional staff, where they said such funding – which amounts to one tenth of what the US recently wired to
the US military-industrial complex Ukraine – is urgently needed, adding that any interruption in the supply of enriched Russian uranium could cause operational disruptions at commercial nuclear reactors, the person said. US nuclear energy industry participants have also been briefed on the proposal; while the plan requires approval from Congress it is unlikely that lawmakers will refuse these relatively modest demands if the alternative is the threat of widespread blackouts and immediate political career termination.
The proposal, Bloomberg continues, aims to spur development of more domestic enrichment and other steps needed to turn uranium into reactor fuel; It would also create a government buyer directly purchasing enriched uranium, including the type used in a new breed of advanced reactors now under development.
The proposal is dovetails with legislation introduced earlier this year by Senator Joe Manchin, the West Virginia Democrat who serves as a key swing vote, and Senator Jim Risch, an Idaho Republican, that would authorize billions of dollars in funding to increase the country’s domestic uranium enrichment capabilities. Other congressional backers of expanding US enrichment capabilities include Senator John Barrasso, a Wyoming Republican who serves as the top GOPmember of the Energy and Natural Resources Committee.
That said, even with billions in backing, it won’t be easy for the US to jump-start the domestic uranium industry. The country has only one remaining commercial enrichment facility – a New Mexico plant owned by Urenco, a British-German-Dutch consortium.
While the immediate list of companies that would benefit from such a funding boost include Centrus Energy, which is building an enrichment facility in Ohio, and ConverDyn, a joint venture between Honeywell International Inc. and General Atomics that provides uranium conversion services, it is likely that the entire uranium space would move higher as the price of spot uranium will likely soar.
Sure enough, the market reaction was fast and furious, with the broader Uranium space in general and the Global X Uranium ETF in particlar, surging as much as 7% to its highest intraday price in a month on the news. Shares of uranium miners such as Cameco and Energy Fuels also soared with nuclear fuel provider Centrus Energy (LEU).
And while we wait for more details about the plan to emerge so we can pinpoint the biggest beneficiaries, here are some variant perception views from GLJ Research in kneejerk response to the report:
- URANIUM BEAR ARUGMENT: “The announcement today by the US government is just to build more enrichment capacity. Good if you're LEU. Irrelevant if you're anyone else. It basically going to all go to the centrifuge project that LEU (odl USEC) has. That was my read of it.”
- RESPONSE FROM URANIUM EXPERT: "That is a completely false statement. If part of this plan is to sanction Russian uranium then LEU will get hit hard right away, as that is their only cash flow. The devil will be in the details, but what this means is that DOE want funding to build a US enrichment capacity which will require at least 10 Million pounds per year of mined U3O8 feed in order to replace Russian enriched uranium. The US doesn't have that mined capacity in operation so this will be a huge boost to US and Canadian uranium miners. We have no idea based on the news so far whether Centrus will be the one tasked with building enrichment capacity. We need to see the full details of the ask to Congress."
- URANIUM EXPERT VIEW ON WHAT THIS MEANS FOR PRICES NEAR-TERM: “With SPUT raising a lot of cash today, and already holding nearly $100 Million, there is going to be some big upside in the Spot price over the coming days and weeks. Spot hit $51 today, with is a $5/lb rebound in the past 2 weeks.”