| Growing interest in nuclear power, produced at plants such as the Swedish facility pictured above, is helping drive up prices for uranium, a common nuclear fuel. Source: imagean/iStock/Getty Images Plus via Getty Images. |
Spot uranium prices surged to fresh highs not seen since 2007 in recent trading, signaling a tight nuclear fuel market, heightened expectations for future demand, and the need for more mine restarts and new builds, according to uranium industry experts.
The Platts assessed spot price of U3O8 delivered to Canada hit $92.75 per pound Jan. 9. Until recently, monthly average spot prices last exceeded $90/lb in November 2007, according to pricing data from nuclear fuel consultancy UxC LLC published on uranium-miner Cameco Corp.'s website.
High spot prices come as nuclear energy takes an increasingly high profile in global efforts to stem the worst impacts of climate change. Meanwhile, rising uranium prices in the past few years have fueled restarts of uranium mining operations, which heavyweight miners curtailed during a protracted bear market following the 2011 Fukushima Daiichi reactor disaster.
Some industry participants and analysts expect mining companies to announce more restarts in 2024 and for new builds to look more alluring amid higher prices and supply deficits that are projected to last for years to come.
"The price of uranium will go as high as it takes to close that gap, and that ... gap could take years, frankly, to fill," said Scott Melbye, president of the Uranium Producers of America, an industry group.
The spot uranium price Jan. 9 was up by 91.2% compared to a 2023 low of $48.50/lb Jan. 3 of that year, and an increase of 288.1% compared to a 2020 low of $23.90/lb March 17.
Seller's market
Limited uranium supplies and ongoing purchases by financial players such as the Sprott Physical Uranium Trust Fund
Adding further momentum is a US bill that passed the lower chamber of Congress in December 2023
"If this bill passes, there is likely to be further upward price pressure given the potential for Russian supplies to be curtailed sooner, thus driving up utility near-term demand," Hinze said.
Skyrocketing spot prices may drive contract prices higher, as sellers demand more for their product, Melbye said. For short-term needs, higher prices are unlikely to deter utilities as uranium is only a part of their total fuel costs, Hinze said.
Climbing contract prices — covering larger amounts of uranium — may hurt more.
"Clearly some utilities are experiencing 'sticker shock' these days," Hinze said. "Ultimately, all utilities around the world will be seeing higher nuclear fuel costs in the coming years due to rising market prices."
With less material available on spot markets than in the past, buyers will increasingly have to secure uranium under longer-term contracts, TD Securities analysts said in a Jan. 9 note.
The analysts said they "expect to see higher volumes and prices in the term market on a sustainable basis."
Mining momentum
In the near term, higher uranium prices will continue to drive restarts, said Melbye, who is also executive vice president of Uranium Energy Corp. The higher prices have spurred industry giants NAZ Kazatomprom JSC and Cameco to restart idled capacity in recent years. Kazakhstan-based Kazatomprom plans to return to full production capacity in 2025, while Canada-based Cameco has said it will continue to add capacity, but only as needed under long-term contract pricing.
In late September 2023, Melbye told S&P Global Commodity Insights that Uranium Energy's decision to restart mines in Wyoming and Texas would hinge on spot prices staying over $60/lb for at least three months.
Melbye said that decision is imminent.
"It shouldn't surprise you if we're restarting this year because we've been taking the whole course of [2023] to prep well-field processing facilities, flow rates, valves [and] pumps — everything to get ready to restart this year," Melbye said. "So look for an announcement on that shortly."
For the longer term, Melbye said he expects investor interest in greenfield projects to pick up. The sector may see investments in new uranium mines come from atypical financial backers, in a similar vein to what has happened in battery metals, where automakers have played a role in funding projects to secure supply of key materials including lithium, Melbye said.
"I don't think we're that far off — whether it's utilities, or reactor vendors, or even oil and gas companies that come in and invest in our space," Melbye said.
The Platts spot U3O8 assessment is an offering of S&P Global Commodity Insights.