Spot uranium prices have recently reached their highest point since 2007, standing at $101 per pound, according to data from Numerico. This surge in prices indicates a constrained nuclear fuel market, growing expectations for future demand, and the need for additional mine restarts and new constructions, as experts in the uranium industry have stated.
The increase in uranium prices aligns with the global focus on nuclear energy as part of efforts to mitigate climate change. Additionally, rising prices have led to the revival of uranium mining operations that were scaled back after the Fukushima disaster in 2011. Analysts and industry players predict that more mine restarts will occur in 2024, and new constructions are becoming more attractive due to the rising prices and anticipated supply deficits in the coming years.
The spot price of uranium surging to $100 per pound represents a more than 100% increase from the low in 2023 and a staggering 300% rise from the low in 2020.
The 16-year high uranium price of $101 per pound, the highest since 2007, is driven by several factors. The shortage in uranium supplies following the Fukushima incident has driven prices upward. Furthermore, a U.S. bill seeking to ban nuclear fuel imports from Russia has contributed to the upward trajectory of prices. The bill, known as the “NO RUSSIA” Act, aims to remove Russia from the U.S. uranium market. Once the bill passes the Senate, near-term demand for uranium will likely surge even higher.
According to uranium market analyst Marin Katusa, the high uranium price reflects the true cost of bringing previously built and permitted facilities online to replace uranium exports from Russia and Niger. Katusa also noted that with the U.S. banning Russian imports, investing in permitted and built-out production in the U.S. becomes more logical. The banned imports also include Kazakh production due to Russian enrichment. Katusa further stated that uranium prices would need to increase even more to incentivize new projects, such as those in the Athabasca Basin, which would require prices higher than $100 per pound.
The growing demand for clean energy, particularly from data centers that require more power for new technologies, has led to the development of small modular reactor (SMR) technologies. These reactors, with a capacity of under 300 MWe, are being developed in Western countries with increasing private investment. North America is expected to be at the forefront of this nuclear resurgence.
Katusa also highlighted Japan’s decision to build the world’s largest nuclear power plant and its pro-nuclear stance since Fukushima. This, along with the positive outlook for nuclear technology globally following the recent COP28 climate summit, will create new demand for long-term uranium supply in politically stable jurisdictions.
As the world strives to reduce carbon emissions, the demand for zero-carbon nuclear energy is expected to increase significantly, leading to a further explosion in uranium demand. Escalating spot uranium prices may also put upward pressure on contract prices as sellers seek higher returns. While higher prices may not deter utilities in the short term, increasing contract prices covering larger quantities of uranium could have a more substantial impact.
Some utilities are already experiencing “sticker shock” due to the rising prices. Experts anticipate a widespread increase in nuclear fuel costs in the coming years as market prices continue to rise. In response to the higher prices, industry giants like NAZ Kazatomprom JSC and Cameco are restarting idle capacity. Canada-based Cameco will add capacity as needed under long-term contract pricing, while Kazakhstan-based Kazatomprom, the largest uranium producer, plans to return to full production capacity by 2025.
However, Kazatomprom faces challenges related to the availability of sulphuric acid, a critical operating material, which may affect their production plans for 2024 and 2025. Despite these challenges, the surge in uranium prices is good news for companies like GoldMining Inc (GLDG), which holds high-value assets in the sector.
Overall, the surge in uranium prices reflects a resurgence in the nuclear energy sector, driven by geopolitical shifts, legislative actions, and the growing demand for clean energy. The uranium market is poised for unprecedented growth in the coming years.