The 75% increase in the price of uranium over the last 12 months took most investors by surprise just as the potential for another 60% increase is being overlooked despite clear pointers to the boom in uranium getting a second wind.
Last year’s uranium rush was a simple case of demand exceeding supply after a prolonged drought in the development of new mines and re-awakened interest in nuclear power as a low emissions source of base-load electricity.
Three recent events in the U.S. have built on interest in uranium and the nuclear fuel cycle as has the latest sabre-rattling over the war in Ukraine.
Atomic plant Vogtle, is a 2-unit nuclear power plant located in Burke County, near Waynesboro, ... [+]
The first development which returned nuclear power to the front page was the start last week of electricity production at the fourth reactor of Georgia Power’s Plant Vogtle, described as the last big nuclear build as the focus shifts to small modular reactors.
Then came bipartisan political support in Washington for laws which will speed the construction of a new generation of nuclear power plants.
Capping off this burst of activity focused on a once contentious power source was the passing by the U.S. Senate of a bill banning the import of Russian uranium which is now waiting on the signature of President Biden before it becomes law.
The ban, if enforced would be a progressive shut down of Russian material with power utilities allowed waivers until the end of 2027 to manage the shift to sourcing fuel domestically or from other suppliers such as Canada or Australia.
But layered on top of uranium-connected events in the U.S. was the latest threat from Russia’s President Vladimir Putin to use short-range tactical nuclear weapons against the western world because of its support for Ukraine.
Russian President Vladimir Putin on a screen set on Moscow's Red Square. Photo by ALEXANDER ... [+]
Most observers are confident that Russia will not resort to the use of nuclear weapons but Putin show his displeasure with the U.S. ban on Russian uranium by pre-emptively imposing his own ban.
An early shutdown of Russian uranium exports could create a significant shortfall in supply, potentially driving the price up from its current $92 a pound to more than $150/lb, according to investment bank reports.
In a note to clients last week, before Putin’s latest nuclear weapons threat, Morgan Stanley said the U.S. ban was a positive development for the price of uranium while the risk of a retaliatory ban on Russian exports “would tighten the market earlier than expected”.
The potential for Russia imposing its own ban of uranium shipments to the U.S. will have increased with the latest developments in Ukraine.
Uranium Price Tailwinds
Citi said the U.S. ban was a definite tailwind for the price of uranium which has risen by 74% from $53/lb to $92.40/lb since this time last year and is up 7% over the last two weeks.
How quickly the ban might take effect is a factor the future price of uranium with waivers described as “a loophole for the continuous supply into the U.S. market”.
“However, retaliation by Russia and a potential export ban (of its own) would be more destabilizing for uranium prices, included in our bull case scenario of prices averaging $121/lb this year and $151/lb in 2025,” Citi said.
If that peak price is achieved next year, it will eclipse the previous all-time high of $140/lb reached in the boom year of 2007.
