Prolonged upheaval in a normally calm sector was brought about by Russia’s invasion of Ukraine in February 2022. It concerns the industry of mining and supplying nuclear power plants with uranium – as well as maintaining them, since in many cases the relevant know-how was held by Russian companies.
Ukraine signed a 12-year agreement with Canada. European utilities that also depended on Russia tried to turn to other sources. Now, the challenge is to find the necessary quantities of Uranium.
According to industry experts, companies that manage nuclear plants usually receive the quantities they have requested two to three years after signing a contract. So increased demand pushed the spot price of uranium to $65 a pound by September 18, the highest since 2011. At the industry’s annual conference in London, which drew 700 delegates, some warned that the price could climb even to 100 dollars. That’s because the two largest producers have exhausted capacity by 2027, and some utilities may face shortages even in 2024.
Which countries are the suppliers of Uranium?
85,000 tons of uranium are used annually, a very small amount compared to the millions of tons of copper, for example. Most of the supplies come directly from the mines. Canada and Kazakhstan, two reliable exporters, account for 60% of this primary supply. A quarter of the total global supply, however, arrives from secondary sources. Spent fuel blocks, which are replaced every three to four years, are enriched and reused. The fuel is also produced by diluting weapons-grade uranium, which contains over 90% fissile elements, to concentrations of just 3-4%. In the two decades following the Cold War, thinning of just 30 tons per year replaced 10,000 tons of annual mine production.
At the same time, more stocks are released regularly. America, China, France and Japan hold a large stockpile that they release in installments when prices are high.
Turmoil in this relatively calm market
In this relatively calm market, then, two factors are causing severe turbulence.
1. The first is the resurgence of demand. The search for stable, low-carbon energy sources and Russia’s war in Ukraine have driven governments back to nuclear power, which has roughly the same emissions as wind power and can operate even if gas pipelines are shut down. About 60 new reactors are under construction, which are estimated to add an additional 15% to global nuclear power generation capacity over the next decade.
2. The second factor is small “spindle” reactors that, being cheap and easy to build, could spur demand for fuel. It is estimated that such reactors could cover half of the production in France by 2040.
At the same time, in recent years many private companies have entered the sector. Two of the largest of these, Sprott Physical Uranium Trust and Yellow Cake, have in recent years secured 22,000 tonnes of uranium – more than 1/4 of the annual demand. And, apparently, they have time to keep this amount for a long time. Until it is judged that its promotion to the market will be sufficiently profitable.
