Possibly for the first time in a decade, there is currently a compelling argument for uranium. Uranium suffered a significant setback after the Fukushima Daiichi nuclear disaster in Japan in 2011.
The event led to the cancellation of nuclear power expansion plans around the world and made the usage of uranium a hotly debated topic.
Prices were low, and attitudes toward uranium were subdued due to a persistent surplus. However, 10 years later, the case for uranium is becoming more compelling as nations prioritize addressing climate change and reducing carbon emissions while attempting to provide electricity to millions of newly minted middle-class citizens.
In the next 10 years, uranium’s fortunes could change as supply and demand dynamics improve and geopolitical concerns increase. Continue reading to find out some of the factors that help prime the growth of the Uranium market.
Uranium Demand to Remain High Despite Cuts in Fossil Fuel Use
The primary source of uranium demand worldwide is nuclear power, a form of energy with low carbon emissions. Nuclear energy emits the same amount of carbon dioxide per kW/h as offshore wind energy, which is a significant reduction over traditional fossil fuels.
Comparatively, coal produces an astounding 820 CO2 per kW/h of output.
Global nuclear energy production is expected to increase by 650 TWh between 2019 and 2040, up from just 210 TWh between 2000 and 2019. This increase is due, in part, to growing social and political pressure for countries to reduce their fossil fuel footprint.
Nuclear power is predicted to generate less electricity between 2019 and 2040 than only wind and solar did between 2000 and 2019. The US and Europe are the two developed markets where nuclear power generates the majority of its 10 percent share of the world’s electricity.
Mining Shutdowns and Production Reductions
In response to the COVID-19 outbreak, uranium production has decreased to a level not seen for over 10 years. Due to COVID, the Canadian mine of the same name operated by the uranium goliath Cameco closed in December 2020.
Cigar Lake shut down for the second time that year. In 2019, Cigar Lake was in charge of 13 percent of the world’s uranium production.
Additionally, citing an oversupplied market, Kazatomprom, Kazakhstan’s state-owned uranium mining firm, prolonged production restrictions by 20 percent through 2022. Kazatomprom supplies 22 percent of the world’s uranium.
The Fukushima tragedy caused a sustained decline in uranium prices, but as a result of Kazatomprom’s reduction, the supply/demand dynamics are now stabilizing. The action is comparable to Saudi Arabia’s choice to reduce supply in the oil markets to encourage higher prices.
Prices are still low compared to the $100/lb prices witnessed in 2007, but the first signs of a resurgence in a long time are beginning to emerge.
Uranium seems to be ready for a comeback. There is a long-term trend to cleaner energy, such as nuclear power, as well as market imbalances brought on by supply cuts and geopolitical tensions. These are not anticipated to decrease anytime soon and are favorable for uranium. These considerations provide a strong case for investors that uranium prices will increase following a decade of price declines.
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