Investors eye uranium thanks to new products, disputes and more

After breaking out of a price rut that had limited values ​​to less than US$30 per pound since late 2016, the spot price of U3O8 broke through this threshold in April 2020 and has continued to rise. increase since.

After years of limited movements largely attributed to oversupply following the Fukushima nuclear accident in 2011, the uranium market has spent the past two years making significant gains – the product has surged by 164%, from $24.70 on January 1, 2020 to $64.51 on April 13. , 2022.

When the values ​​reached a five-year high in mid-April, they marked a price increase of 255% since 2017.


Interest in war-fueled uranium in Ukraine, new products

Uranium supply and demand fundamentals have improved over the past five years, but much of its recent increase in value can be attributed to geopolitical events and energy and energy security concerns. own.

With oil and gas prices soaring, inflation reaching record highs, and questions swirling around supply chain security, uranium has begun to garner more attention.

“The first quarter of 2022 bridges the gap between the past year – the year of what we call UxC secondary demand – and the current year – the year of geopolitics,” said Anna Bryndza, vice-president Executive President of UxC. “There is no doubt that Russia’s war in Ukraine is reshaping not just the nuclear fuel industry, but the world as a whole.”

She noted that the war was also leading to greater interest in uranium from investors. “All of this builds on several years of optimizing uranium production and the impacts of the COVID-19 pandemic,” Bryndza added.

Investment demand has been a key driver of higher uranium prices, with Sprott Asset Management launching both a Physical Uranium Trust (TSX:U.UN) and a Uranium Miners ETF (ARCA:URNM) in course of the last 12 months.

The two new vehicles have seen rapid success, with the trust storing 55 million pounds of U3O8 worth US$2.9 million by May 4, 2022, and the exchange-traded fund (ETF) raising a net asset value of US$966 million.

When announcing the ETF, John Ciampaglia, CEO of Sprott Asset Management, noted the heightened investor focus on the materials needed for the green energy transition.

“As global governments increasingly turn to nuclear power to meet the twin challenges of energy transition and energy security, we expect demand for uranium to remain strong,” Ciampaglia said. in a press release. Press release. “Uranium mining is critical to the clean energy transition and URNM provides investors with access to producers, developers, exploration companies as well as vehicles that hold physical uranium. “

During an April interview with Investing News Network (INN), he also spoke about high energy prices, which have both reinforced the importance of nuclear power and catalyzed investor appetite.

“Rising oil and gas prices have two impacts on the uranium market. They increase the cost of production and shipping, but it’s marginal,” he said. “Most importantly, they highlight a key advantage of nuclear power generation over natural gas-fired power generation.”

Ciampaglia went on to note that uranium and nuclear energy are ultimately more economical. “For nuclear power plants, the cost of uranium is about 5% of total operating costs,” he said. “In contrast, the cost of natural gas is about 70% of the total operating cost of a gas-fired power plant.”

Additionally, nuclear plants only need to be refueled every 18 months, while natural gas plants require a constant supply of gas, making them more susceptible to supply disruptions and price shocks. .

The increase in nuclear capacity, a critical factor for the sector

Currently, the U3O8 spot price is holding within the US$54 range, about US$10 lower than the five-year high set at the end of April. However, this decline could be short-lived if supply becomes constrained by additional nuclear capacity.

According to the World Nuclear Association, 100 reactors are planned and/or ordered worldwide, and another 300 are in the proposal phase. This will be in addition to the 440 reactors currently in service worldwide and more than 50 that are under construction.

The United States leads in nuclear energy production, generating 19% of its electricity this way. At the end of 2021, the country had 93 commercial nuclear reactors in operation at 55 nuclear power plants in 28 states.

In a January survey conducted by the Associated Presstwo-thirds of US states said nuclear power would help replace fossil fuels in their region.

“We are delighted and not at all surprised to see so many states turning to nuclear energy given the value proposition that nuclear offers,” John Kotek, senior vice president of nuclear development, told INN. Policy and Public Affairs at the Nuclear Energy Institute. .

Kotek added, “Right now, between state legislation being introduced and new nuclear projects underway in states like Tennessee, Washington, Wyoming and Idaho, nuclear power is under discussions in half the country, with the majority considering policies that will have a direct impact on the industry. .”

Although deployments in each state are different, there is a common goal of reducing greenhouse gas emissions.

“There are various motivations behind these policies,” he said. “Many states recognize the role of nuclear in decarbonization, while others are looking to new nuclear for the potential economic impacts and reliability. The urge to learn more about nuclear energy technology is clearly there and growing.

At a more macro level, nuclear energy, and its vital role in decarbonization, is becoming a hot topic in the energy sector and beyond. Indeed, during the world conference on the nuclear fuel cycle held at the end of April in London, Sama Bilbao y León, director general of the World Nuclear Association (WNA), spoke for the first time about energy nuclear taken seriously.

The WNA chief explained that if the company plans to meet its emissions reduction targets without leaving anyone or a nation behind, “we must use all proven solutions available”.

She told attendees, “Nuclear energy is the only energy that can not only provide low-carbon electricity, but also provide low-carbon heat. This gives us game-changing opportunities to truly decarbonize not just power grids, but the entire economy.

Don’t forget to follow us @INN_Resource for real-time updates!

Securities Disclosure: I, Georgia Williams, have no direct investment interests in any of the companies mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or completeness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the views of Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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