Stars are aligning for uranium price rally

Uranium drums at Cameco’s 83%-owned Key Lake uranium mill in 2014. Credit: Cameco.

The uranium market is emerging from years in the doldrums as the overhang from the  nuclear disaster in Japan is cleared and global demand picks up steam. 

The spot price for U3O8 moved above US$30 per pound for the first time this year as uranium producers and mine developers hoover up above-ground inventories and reactor construction continues apace.

Two new research notes from BMO Capital Markets and Morgan Stanley say today’s price marks a floor and predict a rally in prices over the next few years to the ~US$50 level by 2024.

The stars seem to be aligning for a new phase of nuclear energy investment with the U.S., China and Europe bolstering the bull case for the fuel this month. 

Although nuclear energy was not mentioned explicitly in the US$2 trillion Biden infrastructure proposal released today, its federally mandated “energy efficiency and clean electricity standard” is hardly achievable without it.  

Via Cameco

Over the weekend leaked documents showed a panel of experts advising the EU is set to designate nuclear as a sustainable source of electricity which opens the door for new investment under the continent’s ambitious green energy program.

China’s 14th five-year plan released a fortnight ago also buoyed the uranium market with Beijing planning to up the country’s nuclear energy capacity by 46% – from 48GW in 2020 to 70GW by 2025.


There are several factors working in uranium’s favour, not least the fact that annual uranium demand is now above the level that existed before the 2011 Fukushima disaster when Japan shut off all its reactors:

  • Uranium miners, developers and investment funds like Yellow Cake (13 million lbs inventory build up so far) are buying material on the spot market bringing to more normal levels government and utility inventories built up over the last decade
  • Major mines are idled including Cameco’s Cigar Lake (due to Covid-19) which accounts for 18 million lbs or 13% of annual mine supply.  The world’s largest uranium operation McArthur River was suspended back in July 2018 taking 25 million lbs off the market.
  • Permanent closures so far this year include Rio Tinto’s Ranger operation in Australia (3 million lbs) and Niger’s Cominak mine (2.6 million lbs) which had been in operation since 1978. Rio is exiting the market entirely following the sale of  Rössing Uranium in Namibia.
  • Like Cameco, top producer Kazatomprom which mined 15% less material last year due to Covid restrictions has committed to below capacity production (–20% for the state-owned Kazakh miner) for the foreseeable future.
  • Price reporting agency and research company UxC estimates that utilities’  uncovered requirements would balloon to some 500 million lbs by 2026 and 1.4 billion lbs by 2035.  
  • Roughly 390 million lbs is already locked up in the long term market while 815 million lbs have been consumed in reactors over the last five years according to UxC
  • There are 444 nuclear reactors in operation worldwide and another 50 under construction – 2 new connections to the grid and one construction start so far in  2021
  • Much cheaper and safer, small modular nuclear power reactors which can readily slot into brownfield sites like decommissioned coal-fired plants (or even underground or underwater) are expected to become a significant source of additional demand

There are caveats to this rosy scenario however. 

Morgan Stanley warns that “the opacity of the inventory situation remains a key uncertainty to price – see for example palladium, which needed almost seven years of deficit before the price really took off.”

BMO says given the still high levels of inventories “acute shortages and price squeezes are extremely unlikely, both for this year and the foreseeable future,” adding that “there is no obvious need for new mine supply in the near future.”


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