Uranium: Demand Grows, Prices Rise, but Production Slows

Amid the war in the Middle East, the world’s eyes are focused on oil and gas prices, and the real champion of the increase in 2023 is the so-called “yellowcake,” as traders call uranium concentrate. At the end of November 2023, prices for this commodity used to generate electricity at nuclear power plants in dozens of countries around the world reached their highest level in the last 15 years.

Driven by a surge in demand, uranium futures have demonstrated virtually continuous growth throughout 2023 and are now up about 65% since the beginning of the year. This week, yellowcake contracts exceeded $80 per pound (454 grams) for the first time since January 2008. Over the past three years alone, the price of uranium ore has increased 1.73 times.

Meanwhile, the authorities of many countries, including Italy, are changing their minds and returning to considering nuclear power as the most important source of energy for a “green future” with the minimum possible amount of harmful emissions. At the geopolitical level, the rise in prices was facilitated by the coup in Niger, one of the largest uranium producers in the world, that interrupted the supply of this precious raw material to Europe.

In the last ten years, following the nuclear disaster in Fukushima (Japan), humanity has become wary of nuclear power plants, and uranium prices have fallen on international markets, leading to a significant oversupply.

Russian gas is exempt from Western sanctions, but after the terrorist attacks on the Nord Stream Baltic gas pipeline, many European countries had to face difficulties associated with the supply of gas exported from Russia. Moreover, reducing the use of fossil fuels and switching to nuclear energy are part of the low-carbon energy transition concept.

The International Energy Agency (IEA) said that “to achieve net zero targets, global nuclear power capacity must double by year 2050 from 2020 levels.”

According to the Bloomberg news agency, “the energy transition will further push uranium ore prices up in the coming period, with further surges expected in the market.” The IEA experts also emphasized that the request “will become increasingly broader, since after a period of crisis in these raw materials, now that there is a need for decarbonization and net zero targets, it becomes increasingly necessary to strengthen nuclear power plants as an alternative renewable energy source.” And this is also because with over-reliance on solar and wind power plants, “the price of electricity is constantly rising.” Currently, 443 nuclear reactors generate electricity in 30 countries. About 60 nuclear power plants are currently being built, and another 300 are planned.

The undisputed leader in uranium ore production is Kazakhstan, the largest of the five former Soviet republics of Central Asia, whose global market share reached 42 percent in 2023.

Besides Kazakhstan, the world’s largest uranium producers include Uzbekistan, another former Soviet Central Asian republic, African countries Niger and Namibia, as well as Australia, and Russia in sixth place.

It would not be wrong to say that uranium is seen around the world as a new form of investment to accelerate decarbonization. For example, the world’s largest companies operate in Kazakhstan: from the Canadian Cameco to the French Orano and the Russian Rosatom. As to forecasts for the performance of uranium mining stocks, Matthew Langsford of Terra Capital bluntly told Bloomberg: “Uranium stocks could rise sharply: 50%, 100%, maybe more.”

Everyone agrees that demand will continue to grow. While many European countries, primarily France, have never considered the idea of abandoning nuclear power, other countries are demonstrating resurgence of interest in the “atom”: in Germany, on November 22, a group of deputies from the Liberal Democratic Party (FDP) presented a proposal for restarting seven decommissioned nuclear power plants and building new reactors.

According to the German newspaper Die Welt, one of the MPs, André Tess, professor at the University of Stuttgart who studies energy storage and conversion technologies, said, among other things, that “a safe, economical and respectful energy supply, environmental protection for industrialized countries such as Germany, can only be achieved in the long term through a combination of solar, wind, and nuclear energy,” emphasizing that “Germany must therefore end its solo national efforts in the field of nuclear energy and move closer to our EU partner, France, from the energy policy perspective.”

On the other side of the world, in Japan, after the Fukushima disaster, nuclear power accounts for only 7% of the country’s energy supply, but the Tokyo government has launched a strategy to increase its share to 20-22% by 2030. One of the largest emerging sources of demand is China, which has set a goal of building more than 30 new nuclear reactors by 2030.

Obviously, in such a situation, producing countries want to take advantage of this opportunity and try to increase output. But this is a difficult matter. Major mining company Cameco Corp. has revised its production plans downward due to various supply chain issues in Canada, Bloomberg reports. According to the report “World Uranium Mining until 2026,” Russia increased its uranium production last year by 9% compared to 2021 (the growth rate averaged 2.51% in the previous five years); by 2026 it risks falling again by 5.7%. Nevertheless, according to international experts, “in the context of declining production and export volumes, constantly rising prices contributed to an increase in the influx of dollars into the Russian state treasury.”

In 2022, as stated by the US Energy Information Administration, Russia supplied the US nuclear industry with 12% of imported uranium, while the share of “made in Russia” uranium for the EU countries amounted to 17% of total imports. But after Niger’s military authorities banned uranium supplies to France and other European countries, Russia will be able to increase its presence in the Old Continent’s fissile materials market. Moreover, the Russian nuclear industry, from mining to export of uranium ore, was not subject to even minimal sanctions from the European Union, the USA, or the G7 countries.