Why the Uranium Bull Run May Not Be Over Even With a 70% Surge in Price This Year

The uranium market is experiencing a surge in prices due to struggles in mining and geopolitical risks to supplies. The price for U3O8, a lightly processed concentrate known as yellowcake, climbed to $82.30 a pound this week, the highest price since the start of 2008.

The uranium spot market had been tightening in the past two to three years due to a large "work-off of inventories," said Jonathan Hinze, president at UxC. That began during the COVD-19 pandemic, when some mines were taken offline.

Cameco, one of the world's biggest producers, recently said it may need to buy more uranium with financial buyers before the end of this year to meet obligations to customers after suffering setbacks at key mines.

The market has seen supply in 2023 get a boost from a ramp-up of Cameco's MacArthur River uranium mine in Canada, which had previously been closed since 2018 because of "uneconomic" prices. However, that was offset by a stoppage of uranium exports from Niger due to a coup in July, he said. Niger supplies around 5% of the world's uranium, according to the World Nuclear Association.

Geopolitical risks to uranium supplies as well as nuclear power's role in global efforts toward net-zero emissions have led to a strong demand for the nuclear fuel.

Russia's invasion of Ukraine, led utilities to either buy extra uranium to cover possible Russian delivery disruptions, or to cover new, unexpected requirements.

Meanwhile, at the United Nations' annual climate meeting—known as COP28—more than 20 countries, including the U.S., pledged to triple nuclear-energy capacity by 2050, saying atomic power will be a critical part of achieving global net-zero emissions.

Already roughly 60 reactors are under construction across the world and another 110 are planned, while the lifetime of some existing plants has been extended.

Even as uranium prices have gained nearly 70% year to date, there is more upside potential in the sector, a spokesman for Sprott Physical Uranium Trust, the world's largest physical uranium fund, said. He believes producers will need prices to rise more to justify building new mines.

The rise in prices has happened so fast that companies haven't been able to alter production plans. Many miners are waiting to see whether prices stay at elevated levels before deciding whether to reopen mothballed sites or accelerate new projects.

Morgan Stanley analysts last week said they are more bullish about prices of uranium than any other mined commodity, given supply can't keep up with demand. They expect prices to reach $95 a pound by the second quarter of 2024.