All mineral commodity markets tend to be cyclical. However, the uranium market, subsequent to high prices in the late 1970s, gave way to depressed prices in the whole of the period of the 1980s and 1990s. Spot prices recovered from 2003 to 2009, but have been weak since then.
Nuclear energy adoption is again on the rise after a decade long bear market, triggered by the 2011 Fukushima nuclear disaster. According to Bank of America forecast, the rising support for nuclear energy and tight supply could see uranium spot prices rising to US$70/lb by 2023.
The world is already beginning to see the worsening effects of climate change with more extreme weather events. And to address this, we need to stop burning fossil fuels as soon as possible. But renewable energy sources like wind and solar are incapable of supplying enough energy for our future needs. Nuclear power, on the other hand, is not only carbon-free, it’s also one of the most reliable and safe sources of energy.
The demand supply balance can be understood by the fact that about 440 reactors with combined capacity of about 390 GWe require some 74,000 tonnes of uranium oxide concentrate containing about 62,500 tonnes of uranium from mines (or the equivalent from stockpiles or secondary sources) each year. While the capacity is growing slowly, the reactors are simultaneously being run more productively, with higher capacity factors, and reactor power levels. The increasing fuel demand being offset by a trend for increased efficiencies, thus dampening the demand to some extent.
The cost structure of nuclear power generation, has high capital and low fuel costs. Once reactors are built, it is very cost-effective to keep them running at high capacity and for utilities to make any adjustments to load trends by cutting back on fossil fuel use. Demand forecasts for uranium thus depend mainly on installed and operable capacity, regardless of economic fluctuations.
Low uranium prices had a twofold effect on uranium supply over the last decade. Firstly, miners cut back on production due to the weakness in prices, reducing the primary supply of uranium while blocking new supplies from entering the market.
With more than 54 reactors now under construction and 100 reactors planned worldwide, the demand for uranium is set to grow. Further, utilities signing EUP deals means long term contracting could be starting. Nuclear’s growing role in the clean energy transition, combined with a supply shortfall, could turn the tide for the uranium industry.
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