The uranium market is emerging from years in the doldrums as the overhang from the nuclear disaster in Japan is cleared and global demand picks up steam.
The spot price for U3O8 moved above $30 per pound for the first time this year as uranium producers and mine developers hoover up above-ground inventories and reactor construction continues apace.
Two new research notes from BMO Capital Markets and Morgan Stanley say today’s price marks a floor and predict a rally in prices over the next few years to the ~$50 level by 2024.
The stars seem to be aligning for a new phase of nuclear energy investment with the US, China and Europe bolstering the bull case for the fuel this month.
Although nuclear energy was not mentioned explicitly in the $2 trillion Biden infrastructure proposal released today, its federally mandated “energy efficiency and clean electricity standard” is hardly achievable without it.
Over the weekend leaked documents showed a panel of experts advising the EU is set to designate nuclear as a sustainable source of electricity which opens the door for new investment under the continent’s ambitious green energy program.
China’s 14th five-year plan released a fortnight ago also buoyed the uranium market with Beijing planning to up the country’s nuclear energy capacity by 46% – from 48GW in 2020 to 70GW by 2025.
There are several factors working in uranium’s favour, not least the fact that annual uranium demand is now above the level that existed before the 2011 Fukushima disaster when Japan shut off all its reactors:
There are caveats to this rosy scenario, however.
Morgan Stanley warns that “the opacity of the inventory situation remains a key uncertainty to price – see for example palladium, which needed almost 7 years of deficit before the price really took off.”
BMO says given the still high levels of inventories “acute shortages and price squeezes are extremely unlikely, both for this year and the foreseeable future,” adding that “there is no obvious need for new mine supply in the near future.”