RALLY: Uranium prices are up double-digits this year, at levels only seen three times before. This is a belated catch up to the rally in other commodities widely used across renewables like lithium, cobalt, copper, and nickel (see chart). The uranium market is seeing growing reactor and investor demand and tight supply. Its dominant use as fuel for nuclear reactors is seeing a re-appraisal as part of the solution to getting to net-zero, and with development of new smaller and modular reactors (SMRs). This is starting to boost uranium demand at the same time as its low prices history has widened the mine supply deficit to 25%. This is now worsened by supply fears from major producers Russia, with sanctions disruption, and Niger, after its recent coup.
FUNDAMENTALS: Nuclear has no carbon emissions, is constant unlike wind or solar, and time tested, making up 10% of global electricity production across its 440 reactors. A projected 50% nuclear plant expansion is underway, led by China and India growth. This is more than offsetting shutdowns, like Germany, and driving a gradual turnup in total demand. Whilst low historic prices have cut exploration and supply. Mine production has crashed to 25% below demand. Production is focused in Kazakhstan, Canada, Namibia, with Australia having largest resources.
EXPOSURE: The industry is tough to access for investors. Many of the largest producers like Kazakhstan’s Kazatomprom (23% supply), France’s Orano (11%) and Russia’s Uranium One (9%) are state owned. Canada’s Cameco (CCJ) is the major exception. The world’s no2. producer (12%) has three mines in Canada and Kazakhstan, and is up 50% this year. Investor access improved with the 2021 launch of the Sprott Physical Uranium Trust. It is helping prices with its buy-and-hold strategy that has grown assets to $3.5 billion and now owns uranium equal to 5% of annual supply. These are the top two positions in the Global X Uranium ETF (URA).
All data, figures & charts are valid as of 07/08/2023.