Uranium prices hit a 16-year high due to the imbalance between supply and demand for uranium and the need for a clean energy transition.

On Monday, the spot price of uranium trioxide rose to 92.5 US dollars/lb, a new high after the high price in 2007. However, there is still a gap with the all-time high of 148 US dollars/pound in May 2007.

Bank of America and Bank of Bergen analysts have successively released reports saying that the uranium market is entering its third bull market, and uranium prices are expected to rise to 100 US dollars/pound.

Bank of America analysts believe that the tight supply and demand situation in the uranium market may continue until 2025, and uranium prices will continue to soar in the next few years. The team raised its target price to $105/lb in 2024 and $115/lb in 2025.

Uranium ushered in a bull market

From the demand side, nuclear energy is receiving renewed attention, while uranium is mainly used for nuclear power generation, and demand has increased accordingly.

Since the Fukushima nuclear disaster, the safety of nuclear energy has been questioned, and many countries have re-evaluated the role of nuclear energy. However, with the passage of time, and the world's urgent need to reduce carbon emissions, the world is striving to reduce carbon emissions and switch to cleaner energy. Among them, nuclear energy, as an energy source without carbon emissions, has once again become the focus of global attention.

Fluctuating fossil fuel prices and ambitious decarbonization goals prompted the US and 20 other countries to announce that nuclear power generation will triple by 2050.

Global electricity prices are rising, driving nuclear energy as a “substitute” for electricity. Furthermore, with the help of the ESG boom, uranium has become a hot spot for ESG investment as a clean energy source.

Furthermore, geopolitical events have accelerated the demand for uranium. How high can the price of uranium rise? Some analysts believe that this depends to some extent on how quickly countries get rid of their dependence on Russian uranium supplies.

Russia has about half of the world's uranium enrichment capacity and is an important global supplier of uranium and enriched uranium. Other than Russia, there are only two major Western uranium suppliers, Urenco and Orano. Any geopolitical event that could affect its uranium exports could have a significant impact on the global uranium market.

Due to concerns about the safety of uranium supply, some Western utilities have reduced Russian uranium imports and diversified their search for new sources of supply outside of Russia, and the Russian-Ukrainian dispute has accelerated their search process, boosting overall global demand for uranium. According to data from uranium market data company UxC, demand for uranium is growing dramatically due to an increase in the volume of contracts signed by utility companies. The total number of contracts signed last year reached 160 million pounds, the highest annual total since 2012.

Enriched uranium is uranium used in nuclear reactors. Orano is expanding its enrichment capacity by about 30%, but the new enrichment capacity is not expected to be put into use until 2028. Until then, the increase in production capacity of Orano, a major Western uranium supplier, will not have a substantial impact on the market.

From the supply-side perspective, the world's top two uranium producers, both Kazakhstan and Canada, have experienced setbacks. Kazatomprom is Kazakhstan's national uranium mining company and one of the world's largest uranium producers. It experienced a shortage of sulfuric acid during production. Sulfuric acid is an important chemical for extracting uranium and is used to extract uranium from uranium ore. The shortage of sulfuric acid is hampering Kazatomprom's ability to produce uranium. To address the shortage of sulfuric acid, Kazatomprom announced plans to start building a sulfuric acid plant in 2024 to ensure the supply of sulfuric acid and reduce the risk of production interruptions.

Kazatomprom is expected to resolve production restrictions in 2025. Until then, the uranium market is likely to continue to face tight supply and rising prices.

Cameco is a major Canadian producer of uranium. Due to issues such as delays in equipment and production expansion plans, Cameco was unable to produce enough uranium to meet market demand.

Furthermore, the Niger is the second-largest supplier of natural uranium to the European Union. The Niger stopped uranium exports after last year's coup, and it's unclear when supplies will resume.

Currently, uranium stocks are lower than expected, production is declining, and the imbalance between supply and demand is driving up uranium prices.

In an interview with the media, UXC President Jonathan Hinze stated:

“The uranium market is only going to get more tense.”

Mining companies' stock prices have risen, and the ETF market is bullish

The boom in the uranium market led to an increase in the share prices of related mining companies. For example, since December 2020, mining companies such as$Cameco (CCJ.US)$Shares rose nearly 300% as a supplier of uranium$Uranium Energy (UEC.US)$The share price rose even more significantly, reaching 530%.

Not only mining companies, benefiting from high return on investment, funds holding physical uranium have begun to be more active in purchasing spot uranium, and the number of funds investing in the uranium market continues to increase. Large quantities of physical uranium were purchased, and the supply of uranium on the market was reduced, thereby driving up the price of uranium.

For example, those holding physical uranium$Exchange Traded Concepts Trust North Shore Global Uranium Mng Etf (URNM.US)$Up nearly 300%. For example,$SPROTT PHYSICAL URANIUM TR (SRUUF.US)$und$YELLOW CAKE PLC (YLLXF.US)$It has risen by about 80% and 70%, respectively, over the past 12 months.

Editor/Somer