Toronto-listed Cameco has warned that a proposed 10% US tariff on Canadian energy products, including uranium, could lead to significant price inflation in the global uranium market, even though the company itself is well-positioned to mitigate direct financial impacts.

CFO Grant Isaac said on an earnings call on Thursday that while Cameco had taken steps to protect its financial position, the broader market could see higher uranium prices as non-tarrif suppliers would adjust their prices upward to just below the tariff threshold.

“A 10% proposed tariff from a major supply source like Canada will effectively raise the uranium price by 10%,” said Isaac. “It’s not hard to figure out. It’s kind of Econ 101.”

“Tariffs are a sales tax on imported goods, and that sales tax will ultimately be passed on and those who aren't subject to it will take advantage of it.”

Isaac noted that uranium demand in the US was largely inelastic for contracted volumes, meaning utilities must continue purchasing regardless of price increases. With domestic uranium supply substitution low, the market will still require imports.

Cameco CEO Tim Gitzel added that the industry faced a similar threat in 2017 during the Section 232 investigation into critical minerals imports, including uranium.

He said that Cameco had added contractual protections against future tariffs and strategically positioned uranium in various jurisdictions to reduce exposure to potential policy changes.

“A tariff is a border tax paid by the importing party, and what we recognised during the Section 232 investigation was that assuming North America is a free trade zone is probably over,” Gitzel said.

“Our neighbour to the south has discovered the hammer in the toolbox, which is tariffs and we began to prepare for a future where they might use it and good thing we did. We wrote a number of contracts that effectively moved tariffs into the tax clause of a contract,” he said.

Any tariff in the buyer’s country is the buyer’s responsibility, Gitzel stressed.

While older contracts may not have had such provisions, Cameco has since ensured that new agreements protect the company from tariff-related risks.

Further, Gitzel also said that Cameco had the flexibility to move material within its global supply network to minimise exposure to any potential trade restrictions.

SUPPLY GAP
Meanwhile, Gitzel touched on a growing supply gap in the uranium sector, noting that utilities had secured less than 40% of the uranium they needed to operate through 2040, leaving an estimated 2.1-billion pounds still to be purchased.

This shortfall, he said, would put pressure on supply in the mid-2030s when several major global mines, including Cameco’s Cigar Lake, were expected to reach the end of their mine life and investments to replace them had not yet started.

“Cigar Lake satisfies 10% of global demand, that is an 18-million-pound hole in supply that the market has not yet fully appreciated,” Gitzel warned. “Bringing on new production of that scale online is incredibly challenging.

“We continue to see exciting times ahead for us in the nuclear sector and we have positioned ourselves to benefit, while remaining protected should it not evolve as expected."