Uranium market

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Since 2018 the sentiment towards nuclear energy has improved in the context of net zero carbon commitments, concerns around concentration of supply and an increased focus on energy security following Russia’s invasion of Ukraine. The U₃O₈ price has started to respond positively as the supply/demand imbalance has become more widely recognised.

Key demand and supply side drivers

Demand side drivers

+ Long-term growth in global electricity demand

+ Strong growth forecast for nuclear in the large developing economies in Asia

+ Low carbon emission energy source supporting 2050/2060 country emission targets

+ Increased focus on energy security in light of geopolitical developments is driving a rethink in energy policies in countries that previously moved away from nuclear

+ Nuclear’s ability to provide reliable and predictable electricity to complement renewable sources

+ Progress in developing small modular reactors (“SMRs”) with reduced capital costs and footprint

+ Increased activity in the spot market from financial intermediaries

+ Contracting by nuclear power utilities for future uranium purchases has started to increase from historically low levels

+ Overhang of secondary supply has largely eroded

+ The growth of data centres and artificial intelligence, which requires greater amounts of reliable electricity

– Resistance regarding perceived potential environmental and safety impact is reducing

Supply side constraints

– Concentrated resources (three countries produce 68% of the world’s annual uranium production) increase the risk of supply disruptions due to geopolitical events or other factors

– Significant historical resources reached end of life in 2021 (Ranger and Akouta)

– Exploration and development of new resources has been uneconomic during an extended period of depressed uranium prices

– Cost inflation, supply chain disruptions for essential inputs and industry skills shortages are affecting producers’ ability to increase production, restart idled capacity and develop new resources

– Producers continue to show discipline at current prices

Uranium consumption*World Nuclear Association/World Nuclear Power Reactors & Uranium Requirements (May 2023)

Uranium production (2022) *UxC Weekly, 2022 U₃O₈ Production Review, 15/05/23

Nuclear fuel value chain

The front end of the nuclear fuel cycle is a complex process in which uranium can take up to 18 months to travel from mine to reactor*OECD-NEA, The Economics of the Nuclear Fuel Cycle (1994). While there are nuclear reactors in 32 countries around the world*World Nuclear Association/ World Nuclear Power Reactors & Uranium Requirements (May 2023), the majority of uranium production, conversion, enrichment and fabrication take place in relatively few places.

Mining

Uranium is mined using in-situ leaching, open pit and underground mining.

Uranium ore is processed to produce uranium oxide concentrate U₃O₈.

Conversion

Conversion plants convert physical U₃O₈ from powder form into natural uranium hexafluoride gas (UF₆).

Enrichment

Gaseous uranium (UF₆) is enriched, raising the uranium-235 isotope from the natural level of 0.7% to the range of 3.5% to 5% required for use in nuclear reactors.

Fuel fabrication

Enriched UF₆ is converted to uranium dioxide powder which is fabricated into fuel rods and then fuel rod bundles. Fuel rod bundles are placed into nuclear reactors owned by utility companies.

Power generation

Heat from nuclear fission produces steam that drives turbines to generate electricity.

Uranium enrichment is a sensitive technology from a nuclear non-proliferation standpoint and is tightly controlled. Almost all of the world’s conversion and enrichment capacity is concentrated in China, France, Canada, Russia, the United Kingdom and the United States*World Nuclear Association/ World Nuclear Power Reactors & Uranium Requirements (May 2023).
Typically, nuclear power utilities refuel on average around every 18 months*World Nuclear Association, Nuclear Fuel Cycle Overview (updated April 2021), holding uranium inventories as working inventory (being enriched, or fabricated into fuel) or strategic inventory (forward requirements held in the event of  supply disruption).
Utilities generally seek to secure most of their uranium requirements directly with producers, converters and enrichers (two to three years in advance and for at least five years of deliveries). Typically around 80% to 85% of utilities’ uranium requirements are secured through these long-term contracts.
The balance of their uranium requirements is purchased in the spot market (defined as delivery within a year) which generally trades at a discount to the term contract prices.
The time it takes for uranium to reach a reactor, the extended refuelling cycle and stockpiles held at utilities contribute to the lag before short-term supply shocks reflect in the spot price.

Uranium market

CEO's view

November 2024

My View on uranium – November 2024

What Trump's election victory might mean for uranium

We’ve seen markets around the world respond positively to Donald Trump’s victory in the 5 November election, with investors optimistic of his business-friendly policies. But what about the implications for the uranium market? Here’s my take on what Trump’s second term in the White House might mean for our industry.

Trump’s next presidential term could have several potential impacts on uranium prices, largely due to policies that would likely support the U.S. nuclear energy and mining sectors, as well as potential national security considerations. While no-one can predict the future, here’s how this could play out in terms of uranium prices:

Increased Focus on Nuclear Energy

Nuclear energy plays a central role in energy independence and reducing reliance on fossil fuels. While Donald Trump has made no secret of his continued enthusiasm for oil and gas, a positive stance on nuclear as part of the energy mix would support demand for uranium as a nuclear fuel source. If policies encourage investments in nuclear power, it could signal an increase in demand for uranium, thereby exerting upward pressure on prices.

In his previous term in office, Trump’s stance on nuclear was seen as fairly neutral, largely taking a middle road on policy and regulation. But in today’s context, as nuclear is seen as a major means of powering the US’ boom in energy-guzzling hyperscale data centres and AI (see October’s monthly view), Trump is more likely to see the value in nuclear as advocated by the likes of tech giant and campaign supporter Elon Musk.

Boost in Domestic Uranium Production & Stockpiling

Under a Trump administration, there could be an emphasis on strengthening U.S. energy independence, including uranium production. In previous years, Trump’s administration made efforts to bolster the U.S. uranium industry, such as setting up the U.S. Uranium Reserve. A similar approach could push up demand for domestically mined uranium. US production is higher cost which would put quite a high floor under US prices.

Similar to past initiatives, a Trump administration might look to build a strategic uranium stockpile. If the government purchases large quantities of uranium to build up reserves, this would immediately drive demand, potentially causing prices to spike, especially if there’s a limited number of suppliers meeting the new demand.

Environmental and Regulatory Changes

Trump has typically favoured less regulation on mining and extraction industries. Less restrictive environmental policies could reduce production costs for U.S. uranium miners, enabling them to expand operations. While this could initially increase supply and stabilize prices, it could also make U.S. uranium more competitive globally, potentially balancing out supply pressures in the long term.

Market Volatility

The mere possibility of policy shifts around uranium could increase market speculation, impacting prices. Traders may anticipate shifts toward more U.S.-based uranium sourcing or new restrictions on imports, which could lead to speculative price movements in anticipation of future policy changes.

Trade Restrictions and Tariffs

Trump has historically used tariffs and trade restrictions as a way to limit imports of certain goods for national security or economic reasons. If further restrictions on uranium imports were put into place, particularly targeting Russia (a major uranium supplier), it could limit supply and increase demand for uranium from other sources. This could raise uranium prices, particularly if the U.S. looks to diversify away from foreign sources.

On the other hand, if Trump succeeds in his claim to finding a resolution of the Ukrainian war, this could hypothetically make Russia a viable supplier of Uranium to the West again. Whether Western Utilities would ever return to a heavy reliance on Russian nuclear fuel and what the quantitative impact of such an event would be is however not clear at this stage.

Bottom Line

While there are a number of factors at play, we can learn a lot from looking at Trump’s previous term in office in conjunction with today’s geopolitical and economic backdrop, not to mention the US’ rapidly growing demand for firm power.

If a Trump administration strongly promotes nuclear energy and takes steps to encourage domestic uranium mining while limiting reliance on foreign sources, uranium prices are likely to see upward pressure in the short term due to increased demand and speculation.

October 2024

My View on uranium – October 2024

AI and the nuclear revival

September was an important month for the nuclear energy sector, with developments around the globe pointing to the rapid revival of an energy source once sidelined due to safety and cost concerns.

This month I wanted to look at one of the main factors driving this revival: namely the rise of hyperscale datacentres and artificial intelligence (AI).

Data Centres and AI: Energy Guzzlers

As technology giants such as Microsoft and Amazon look to power hugely energy-intensive infrastructure while balancing carbon reduction goals, it has sparked a resurgence of interest in nuclear. And as a result, the uranium market is seeing a parallel rise in demand.

Data centres, which power the modern digital world, are voracious consumers of electricity. The development of AI algorithms, machine learning models, and cloud-based services is also leading to a surge in energy demand.

After five years lying dormant, Three Mile Island in Pennsylvania was thrust back into the spotlight last month, following news that Constellation Energy is to restart and refurbish the 835 Mwe site. The decision, bolstered by a 20-year power off-take agreement with Microsoft, highlights the alignment between corporate climate goals and nuclear energy development.

Additionally, the rise of Small Modular Reactors (SMRs) represents a new frontier in nuclear technology. Oracle’s plan to power a gigawatt-scale data centre with three SMRs further illustrates how the private sector is increasingly leveraging nuclear energy for large-scale, carbon-neutral power solutions to meet this growing demand.

The Nuclear Revival

Multiple countries, particularly those in Asia and the Middle East, are expanding their nuclear programmes. South Korea, for example, has issued construction licenses for new reactors, signaling a reversal of its previous nuclear phase-out policy. Meanwhile, in the U.S., the Department of Energy’s analysis suggests that substantial new nuclear capacity could be built on existing and retired nuclear sites, further boosting demand for uranium.

Investor sentiment towards uranium and nuclear energy has also shifted positively. A group of major international banks, including Bank of America, Goldman Sachs, and Morgan Stanley, recently expressed support for the expansion of commercial nuclear power. This endorsement from the financial sector could lead to increased capital flows into nuclear projects, both conventional and SMR-based, further driving uranium demand.

Moreover, nuclear energy offers an essential advantage in the race to meet climate goals. The International Atomic Energy Agency (IAEA) projects that global nuclear capacity could increase by 2.5 times by 2050 to reach 950 gigawatts-electric (GWe), fuelled by the urgent need to decarbonize the global economy. SMRs, in particular, are gaining attention because they can be built faster and at a lower cost compared to traditional reactors, making them a flexible and scalable option for industrial energy users like data centres.

Uranium Impact – Risks & Challenges

This nuclear revival has triggered a corresponding increase in uranium demand. The global uranium spot market saw stable activity in 2024 to date, with prices rising to $81.75 per pound in September, marking an increase of $3.75 from August. Forward prices are also continuing to strengthen, signalling the market’s reaction to pending green-fields uranium developments which will only occur at higher price levels.

Despite the optimistic outlook, the uranium market is not without risk, not least the obvious geopolitical factors, such as Russia’s role in the global nuclear supply chain, which could create supply disruptions, potentially driving prices higher but also causing market volatility.

The Future Outlook

As data centres multiply and AI continues to expand, the role of nuclear energy—and by extension, uranium—is poised to expand, perhaps significantly.

I remain positive on the outlook for uranium, bolstered by the global push for clean energy, expanding nuclear programmes, and strong investor interest.

September 2024

CEO Uranium Market View

The Uranium Price Standoff

The current status of the uranium market presents a complex scenario of softer spot prices, reduced production forecasts, and simultaneous global efforts to expand nuclear energy infrastructure.

While demand for nuclear energy surges, driven by ambitious plans from major energy consumers such as China and Russia, the price dynamics in the uranium sector have in the past few months failed to reflect this growing appetite for clean energy.

Instead, production constraints and high costs are creating a standoff in the market, factors which could lead to a bullish future but also point to some near term instability.

Recent data indicates that uranium prices have softened despite significant global developments. Spot prices continue to hover at lower-than-expected levels, with forward prices weakening marginally, standing at $91 per pound for three-year contracts and $98 per pound for five-year commitments. This weakening has occurred even as both China and Russia commit to vast nuclear energy expansion projects.

China, for instance, has approved the construction of 11 new reactors with an investment of $31 billion. Russia, too, has ambitious plans for 37 new reactors by 2042. Despite these massive projects, market optimism has not fully translated into strong price performance.

One reason for this paradox might be the production issues faced by some of the largest uranium suppliers. Kazatomprom recently downgraded its production estimates for 2025, citing challenges with sulfuric acid availability and construction delays as primary reasons for reducing production targets by roughly 13-16 million pounds.

The increase in production costs, including a significant rise in the Mineral Extraction Tax, has also contributed to a tougher operating environment for suppliers. All-in sustaining cash costs surged by 45% in the first half of 2024 compared to the previous year, which adds additional pressure to the market’s supply side.

On the demand side, the growth of nuclear energy is undeniable. As nations strive to reduce carbon emissions and transition toward greener energy sources, nuclear power is now globally recognised as a reliable, carbon-free solution.

The renewed interest in nuclear energy, particularly from China and Russia, comes at a time when the urgency to combat climate change has reached new heights. This creates an apparent contradiction: rising demand for uranium as an essential fuel source, yet a market hampered by production setbacks and relatively low prices.

The uranium market appears to be in a holding pattern, waiting for supply constraints to intensify before prices can respond more aggressively to demand.

Investors are likely watching developments like Kazatomprom’s lowered production forecasts closely, as any further reductions could trigger a more significant shift in pricing.

The longer term, however, is compelling, particularly as we expect global supply to remain constrained and as demand from growing nuclear projects tightens the market.

However, for now, uranium prices seem caught between two forces: the promise of future nuclear energy growth and the immediate reality of production inefficiencies and high costs. We expect to see supply-side constraints forcing a further correction, despite a temporary weakness in the spot price.

Recent comment by Vladimir Putin, threatening to restrict the sale of uranium to the west, highlights the challenge, but also the opportunity for the uranium price. The current market situation represents an excellent opportunity to re-build stakes in the physical commodity.

Longer term trends in the market

Nuclear energy remains a key and growing element of global energy supply on the path to net zero Uranium is primarily used to produce electricity in nuclear power plants, with the world’s energy use forecast to grow by nearly 34% from 2022 to 2050, with most of the increase driven by economic and population growth in developing markets*US Energy Information Administration International Energy Outlook 2024 Reference Case. The energy sector accounts for around three-quarters of current greenhouse gas emissions and this growth will need to be primarily driven by low-carbon energy sources to achieve net-zero emissions by 2050*Net Zero by 2050, IEA (October 2021).. Nuclear power is an efficient, secure and very low-carbon source of energy, and its reliability and predictability make it an excellent complement to renewable energy that supports grid stability.The International Energy Agency*IEA World Outlook 2023 scenarios forecast that nuclear energy, as one of the largest current sources of low-carbon electricity, will have an integral role to play in the global response to climate change.
National energy policy is shifting in favour of nuclear in some of the biggest consumers of uranium The recent change in sentiment towards nuclear has created a more positive national and regional policy outlook, particularly in the US, across Europe and in China. A more detailed analysis can be found in our 2024 Annual Report.
Power utility long-term contracts need to be replaced Typically, around 80% to 85% of utilities’ uranium requirements are covered by long-term contracts. Since 2013, annual term contracting volumes have averaged around 50% of the average annual uranium requirements of around 170 million lb. At the end of 2022, only around 73% of European*Euratom Supply Agency Annual Report 2022 (2023) and 45% of US*US Energy Information Administration Uranium Marketing Annual Report 2022 (2023) utilities’ 2028 uranium requirements were contracted. In the longer-term, UxC estimates that cumulative uncovered requirements to 2040 are about 2.3 billion lb and utilities will have to cover the shortfall in the context of constrained uranium production, declining secondary supplies and a tighter spot market.
Supply side constraints The sources of secondary supply that utilities previously relied on have largely been eroded*MineSpans Q124 with utilities in the US, Europe and Japan having drawn down their stockpiled material. A significant quantity of U3O8 has been taken off the market by strategic stockpiling by China and India, as well as sequestering by financial entities, including Yellow Cake and Sprott Physical Uranium Trust, which together have acquired more than 67 million lbs from the market since Yellow Cake’s listing in 2018*Sprott Physical Uranium Trust, “Daily and Cumulative Pounds of Uranium (U₃O₈) Acquired by Trust”, March 2024. Yellow Cake acquisitions.
The impact of Russia’s invasion of Ukraine on the nuclear fuel cycle Russia’s war with Ukraine highlighted the dependency of major Western nuclear utilities on Russian nuclear fuel. While Russia has 9% of the world’s uranium resources and contributes around 5% to global uranium production, it plays a much larger role in the rest of the nuclear fuel cycle with 20% of global conversion capacity utilised and nearly half of all enrichment capacity.
Restrictions on nuclear fuel Sanctions imposed by Western countries on Russia since the start of the war include restrictions and bans on entities and individuals, trade in certain goods and services and freezing of foreign assets. Countries and western utilities took steps to reduce exposure to Russia. In May 2024, President Biden signed into law the Prohibiting Russian Uranium Imports Act, which bans imports of Russian uranium imports into the US from August 2024 to December 2040, although with certain waivers until 2027. More detail can be found in our 2024 Annual Report.