Investors believe commercial nuclear power will be a key part of the move away from fossil fuels and that a lack of new uranium mines will mean the price has to move higher. The World Nuclear Association said earlier this week that world uranium production dropped considerably from 63,207 tonnes of uranium (tU) in 2016 to 47,731 tU in 2020 and “intense development” of new projects will be needed by the end of the decade to avoid potential supply disruptions.
The London-based Financial Times reported that a newly launched investment trust run by Canadian asset manager Sprott Physical Uranium Trust has snapped up around six million pounds of physical uranium, worth around $240m, since launching on 19 July, helping to push uranium prices to over $40 per pound, up from $30 at the start of the year. Global mine supply is expected to be around 125 million pounds in 2021.
John Ciampaglia, chief executive officer of Sprott Asset Management, said demand for uranium from nuclear reactors is expected to grow by a few percentage points per year as new reactors come online. There is also very strong demand coming from non-utility buyers, with some uranium developers recently raising equity capital and “parking the proceeds into physical uranium,” he said.
In an interview with Kitco News, Mr Ciampaglia said most estimates suggest the global fleet of commercial nuclear reactors needs about 175 million pounds of uranium a year to function, but estimates of primary supply “coming out of the ground” and the secondary supply available are about 140 million pounds. “There is a supply deficit and that's why the market is getting excited,” he said.
He said here are many idle mines right now that are not in production because the price is just too low. “Many market participants believe we need a new incentive price to bring those big mines back into production. Some think it’s $50; some believe it’s $60.”
In July, Kazakhstan’s national uranium company Kazatomprom announced it plans to keep 2022 and 2023 uranium production 20% lower than previously planned in an effort to maintain “commercial discipline” and help the market recover. The company – which is the world’s largest producer of uranium – has followed this policy since 2018.
According to the FT, other financial players have also been buying the commodity in a bet that its price will rise. Yellow Cake Plc, a vehicle listed in London in 2018, holds around 16 million pounds of uranium.
Demand for uranium is expected to climb from around 162m pounds this year to 206m pounds in 2030 – and even further to 292 million pounds in 2040 – largely driven by increased power generation in China as Beijing seeks to cut emissions.