Uranium’s OPEC

May 10, 2017

In case you missed the news last week, Kazatomprom (the 100% state-owned utility) in Kazakhstan, has announced plans to create its own uranium trading arm. It will be deciding on an initial public offering of shares in the company in the first half of next year.

This is an interesting and very welcome announcement because the stated goal is for Kazatomprom to be actively involved in uranium trading,” in order to “gain more influence” over prices.

Bloomberg has likened the move to Kazakhstan wanting to be a one-country OPEC. It’s not a bad comparison in terms of market share. After all, OPEC’s members control around 40% of the World’s oil and Kazakhstan produces a similar percentage of the world’s uranium. 

However, I think a Kazakhstan-controlled trading arm has the potential to be far more powerful within the uranium markets than OPEC is in the oil markets.

The biggest reason is also the simplest: OPEC has thirteen members. That’s thirteen individual nation states, each with their own international agendas, their own domestic concerns.  When you consider how complex politics can get between two countries, just think what it’s like trying to form a consensus when thirteen are involved. It’s a wonder they can get anything done at all.

Kazakhstan doesn’t have that problem. It’s one country with a single, dominant national industry – uranium mining – and their goals are simple: maintain employment and maximize revenue. 

The country has an additional advantage: it’s the lowest cost producer of uranium in the world. It uses a particularly cheap version of heap-leaching, based on toxic chemicals, for production and it has all of the Soviet-era infrastructure in place. It’s therefore not vulnerable in the same way as OPEC has been, to the uranium equivalent of US-shale.

Kazatomprom has been clear that the trading arm will take time to set up.  Based on their comments I think next year is the most likely scenario.  Once that happens though, things could get very exciting. The uranium spot market is thin. Very thin. It really wouldn’t take that much to drive up prices and keep them up. Just look at what happened when Kazakhstan announced it would be reducing production. Now consider what they can achieve when they start throwing their weight around in terms of pricing.

The prospects for next year’s uranium market are moving upwards fast.

Dev Randhawa, CEO and Chairman of Fission