US Dept. of Commerce launches investigation of uranium imports

If the U.S. Trump administration extends its trade war to uranium it would be bullish for equities with U.S.-based assets, Haywood Securities commented in a uranium sector update.

U.S. Commerce Secretary Wilbur Ross’s announcement yesterday that he is starting an investigation into whether Washington should impose quotas to restrict uranium imports for reasons of national security drove up the shares of uranium companies with assets in the U.S.

Shares of Laramide Resources (TSX: LAM) jumped 5.66% to 28¢, while Ur-Energy (TSX: URE) rose 4.55% to 92¢ and Energy Fuels (TSX: EFR) climbed 1.32% to $3.08.

“If the government were to mandate that 25% of its nuclear fuel be sourced domestically, this would require an incremental increase of about 10 million lbs U₃O₈, which could slow global inventory attrition in the absence of a matching supply curtailment,” Haywood analyst Colin Healey states in a research note.

Healey notes that uranium production in the U.S. has fallen by about 90% since peaking in 1980 at around 43 million lbs. U₃O₈, and currently makes up about 5% of the country’s consumption, compared to 49% in 1987.

“The remainder of U.S. uranium requirements are filled by imports from Canada (~25%), Kazakhstan (~24%), Australia (~20%) and Russia (~14%) to support the 99 nuclear reactors that produce 20% of the country’s electricity,” Healey wrote.

The analyst also noted that the investigation could have wide implications for the sector.

“We believe that U.S. uranium producers could begin to see incentive pricing designed to increase domestic output, which could be achieved through tariffs, quotas, subsidies, or other incentives.”

The Department of Commerce has 270 days to complete its investigation.

The probe comes six months after Energy Fuels and Ur-Energy petitioned the government for relief under Section 232 of the 1962 trade law that deals with national security. The two companies, among the largest uranium producers in the U.S., submitted a joint petition.

“The companies argue that the domestic uranium mining industry, which has struggled to compete with heavily subsidized foreign producers, is vital to national security and that steps need to be taken to ensure its long-term revival,” Healey explains in his note. “In its petition, their proposed solutions include a quota on imports and a requirement for utilities to purchase domestically sourced uranium (in accordance with the President’s “Buy American” policy).”