Uranium prices steadied in late 2017 after spot prices collapsed to a 17-year low. The price recovery picked up steam in early 2017, with the catalyst behind uranium's turn higher Kazakhstan's production cuts.
Uranium producers have been reducing output since the Fukushima disaster, which dented immediate demand for uranium and put the future of nuclear power in question. With healthy stockpiles of uranium sitting around the globe, the commodity's collapse put most production into loss-making territory. Even as miners cut production prices still slumped as there was already plenty of uranium to go around.
Market participants took notice of Kazakhstan's cuts due to their magnitude. In January 2017, Kazakhstan made a decision to reduce uranium production by 10%, equivalent to 3% of world production.
Speaking at a government hour in Majilis, according to Kazinform, Kazakhstan's Energy Minister Kanat Bozumbayev said: "Today, there is an increase in supply in the world uranium market. This trend arose after the Fukushima incident in 2011 and it continues. Last year, the price of natural uranium dropped significantly. It fell 40 percent over the year." The minister added that by the end of the year the Ministry will reassess the situation in the world market and decide on further actions. According to him, currently, there is no possibility or necessity for dumping and increase in mining.
The long-term demand outlook for uranium remains robust, as it has for years. But, right now the price recovery is fragile. This is because market participants are counting on the nuclear plants currently under construction to boost demand. Until this new demand is here, the price recovery is based largely on supply-side changes. Uranium prices rose about 20% after Kazakhstan cut production. If they decide to ramp up production before demand picks up, it could get ugly for uranium prices.
Right now, suppliers must remain diligent. Although they are likely eager earn money after years of losses they should not increase production at the first sign of higher prices or they could derail the entire recovery.