Uranium prices jumped to their highest level since Russia’s invasion of Ukraine sent commodity markets into spasms as Europe’s energy crisis fueled bullish bets on the future of nuclear power.
The material known as “yellowcake” has jumped 7 percent since mid-August and breached $50 a pound, a price last seen at a time when supply concerns drove many commodities higher in the spring. Many market participants expect uranium to rise even further, with Bank of America predicting it will reach $70 a pound next year.
According to UxC, a nuclear fuel market research and analysis company, looking past the surge triggered by the war in Ukraine, uranium last traded at such a level a decade ago.
Uranium has been lifted in recent weeks by positive news on nuclear power as utilities move to boost supply amid a worsening energy crisis in Europe and improving sentiment toward the fracking fuel in other regions.
Late last month, Japan signaled for the first time since the 2011 Fukushima nuclear disaster its plans to speed up reactor restarts and explore building new plants. California decided to extend the life of its last operating nuclear plant in early September, and days later Germany put its plants on standby to continue operating beyond the end of the year if needed.
“Germany and California are two of the most negative jurisdictions in the world for nuclear power, and both are emerging. I would say hell will freeze over before that happens,” said Per Jander, director of nuclear and renewables at WMC Energy, a commodities trader. “It will have an immediate impact on the market.”
Uranium has been on a tear last year, rising more than 30 percent as investors bet on nuclear power, which has become central to the move away from fossil fuels and the electrification of the global economy. Nuclear power generates steady base-load power without producing carbon emissions, leading the EU to classify it as “green” earlier this year.
This rapid rise in prices in 2021 marked a significant turnaround after the uranium mining industry was plagued by a post-Fukushima oversupply.
Industry executives also pointed to other factors boosting the long-term outlook for nuclear power, which will take longer to feed into uranium prices.
The US Inflation Reduction Act included tax breaks for existing reactors that are likely to extend the life of the country’s fleet. Nuclear energy policy passed in South Korea turn in the opposite direction under the new Yoon Suk-yeol administration, which took power in May, wants to expand the industry instead of phasing it out.
Publicly traded uranium mining companies also rode the wave of investor optimism. Shares in Canada’s Cameco, the world’s second-largest uranium producer, are nearing record highs after rising nearly 30 percent since mid-August.
“We are on pace to have the biggest contracting year since Fukushima,” said Grant Isaac, Cameco’s senior vice president. “We see how this balanced energy policy is reflected in legislative measures. It’s not just words anymore.”
But even as the price of uranium rises on improving sentiment, the commodity remains vulnerable to supply cuts from Russia, the world’s biggest builder of new nuclear power plants. The country accounts for only 5 percent of global uranium production, but is responsible for more than two-fifths of active global uranium enrichment capacity, according to research house Berenberg. In order to create effective nuclear fuel, mined uranium must be converted and then enriched.
“The removal of Russia from the global nuclear fuel chain has the potential to be a source of disruption and price volatility,” Berenberg analysts wrote in a report.
In August, the world’s largest uranium miner Kazatomprom raised its production target to 2024 on expectations of higher demand for nuclear fuel as utilities seek to diversify energy supplies away from Moscow.
Askar Batyrbayev, chief commercial officer of the Kazakhstan-based company, said a decision by Western powers to sanction Russian nuclear fuel would cause a major upheaval in the uranium market.
“If we need to replace the entire Russian supply, it may require the delivery of an additional 10,000 tonnes. That is half of our annual production in Kazakhstan,” he said. “It’s quite a challenge, but it could be achievable if we have these requirements up front.”
Nuclear industry executives also worry that the bloated momentum of nuclear power could be undermined again if its safety assumptions are called into question. Ukraine has 15 reactors.
“If there was a nuclear accident, then all of this would be destroyed,” said Patrick Fragman, CEO of Westinghouse, the US nuclear power company, at the World Nuclear Symposium in London. “Public opinion will go back to the dark ages and open the way for coal.”