Amidst a remarkable turnaround in the uranium market, prices have surged to a staggering 16-year high. This week, uranium hit an impressive US$106/lb, an admirable feat compared to the modest prices of below US$49/lb seen in 2023.
“With short-term dynamics remaining supportive, prices seem on course to exceed the June 2007 all-time highs of US$136/lb.” Jefferies analysts Chris Drew and Christopher LaFemina told the WSJ.
This extraordinary price surge underscores a significant shift in market dynamics, leaving industry experts and investors captivated by the newfound momentum. The price has shot upward following multiple drivers over the past month and a half including COP28, new US uranium funding, and supply shortfalls from major players in the uranium industry.
Tripling nuclear at COP28
During the COP28 UN Climate Change Conference in Dubai, out of some 85,000 participants in attendance, 22 countries endorsed nuclear energy in a pledge to triple global nuclear energy capacity from 2020 levels.
This was also the first-time nuclear energy was specifically included in the conference’s “Global Stocktake” agreement, marking a historic milestone in recognizing the importance of nuclear energy and propping it up as a viable option in the fight to net-zero emissions by 2050.
Alongside the pledge to triple nuclear power, was the commitment of US$4.2B in government-led investments. Later, during COP28, the US, Canada, France, Japan, and the UK jointly announced the funding, with a specific focus on advancing the development of secure and sustainable uranium production and distribution within nuclear energy supply chains.
Despite China being a leader in nuclear development, it wasn’t one of the backers. China leads global nuclear plant construction with plans to nearly double its capacity to 100GW by 2030. The country currently has 22 of the 58 plants being built worldwide.
“Uranium is one of the few commodities where China is not the largest consuming country,” said BMO Capital Markets commodities analyst Colin Hamilton. However, he added, China has taken “significant volumes of excess uranium from the market over the past decade.”
Hamilton said that China will, for now, be adequately supplied unlike incremental utility buyers such as those in Europe and North America, where reactor lives are being extended.
Growing supply risks
Aiding in the recent jump in spot price is a crunch in supply after some of the world’s largest producers announced they are unlikely to meet quotas in 2024.
This month, Kazak state company Kazatomprom, advised that it is likely to fall short of its output targets over the next two years. The top uranium producing company has cited shortages of sulphuric acid and delays in completing construction works at newly developed deposits.
The downgraded guidance adds to supply tightness in the uranium market, as it followed last year’s production cuts from the second largest uranium-mining major, Canada-based Cameco. This is in addition to Germany shutting its doors to nuclear reactors along with the shutdown of French peer Orano’s Niger operation in September.
On top of a shortage in supply, prospective producers have been grappling with soaring development costs, leading to setbacks such as NuScale Power Corp.’s cancellation of plans to build a power plant and subsequent layoffs.
“The global pivot back to nuclear energy creates opportunities and challenges,” said John Ciampaglia, CEO of Sprott Asset Management. “We need to rebuild supply chains that have long since disappeared.”
US puts money on uranium
Also in January, the US Department of Energy (DOE) called for bids from contractors to establish a domestic supply of nuclear fuel called HALEU. HALEU, or high-assay low enriched uranium fuel, will be used in next-generation reactors and is enriched to 20% compared with traditional uranium fuel used in today’s 5% reactors.
Bloomberg reported that shares for North American miners like Global Atomic Corp. and NexGen Energy Ltd., as well as Australian companies such as Paladin Energy Ltd. and Deep Yellow Ltd., all witnessed a rise in share prices after the DOE’s announcement.
According to the EIA, Russia currently accounts for 12% of US uranium supply and HALEU (which will fuel reactors of tomorrow) is only commercially available from the Eurasian country.
This new call comes as the US attempts to further decouple from Russia, with legislation in the works to bar Russian enriched-uranium imports and a US$500M check allocated from the 2022 Inflation Reduction Act for proposals of HALEU production services.
“Nuclear energy currently provides almost half of the nation’s carbon-free power, and it will continue to play a significant part in transitioning to a clean energy future,” commented US Secretary of Energy Jennifer M. Granholm.
“(This plan) is strengthening…the domestic buildup of a robust HALEU supply chain, helping bring advanced reactors online in time to combat the climate crisis.”
Overall, the surge in shares of uranium mining companies reflects the growing demand and political support for nuclear energy, driven by its climate-friendly properties and the need for domestic energy security.
The US government’s plans to boost domestic production, coupled with global efforts to triple nuclear energy capacity, will see the mining and metals sector need to navigate supply chain challenges while capitalizing on the opportunities presented by the rising and ever-growing demand for uranium.
