Uranium’s Breakout Year – 50% Surge Attracts Big Institutions as Demand Remains Ramping Up
Recording date: 25th October 2023
Uranium’s Fundamentals Signal a Major Bull Market
After languishing for over a decade, uranium prices are on the cusp of a new bull market that stands to reward investors positioned in advance. A confluence of factors suggests the uranium market is transitioning to a period of sustained higher prices needed to incentivize new mine supply.
The key demand driver is global nuclear power utilities contracting to lock in long-term uranium supply. This appetite for signed long-term deals cratered after the 2011 Fukushima disaster, as utilities instead ran down excess inventories. But contracting volumes are now accelerating again as outlooks improve for nuclear power’s growth trajectory.
Industry estimates project over 1.5 billion pounds of new uranium supply will be required by 2040 under base case scenarios. Many reactors face life extensions rather than early retirement. Dozens of new units are under construction. Smaller modular reactors are also poised for wider deployment.
This collective expansion of nuclear energy is necessitating new long-term uranium supply contracts to fuel reactor requirements. Major miners have reported contract prices in the $50-80 per pound range, up sharply from under $30/lb in 2020. Further inflation in contract prices is likely as more utilities compete for limited uncommitted supply.
While rising prices normally call forth increased mine supply, uranium markets rarely behave linearly. Existing mines have faced unexpected setbacks recently despite higher prices. New mines take well over a decade to develop. And projects in speculative jurisdictions carry exceptional risks.
All this makes smooth supply growth impossible. The industry requires contract prices above $70/lb to incentivize capacity replacement and expansion. With uranium demand swelling, the widening supply deficit points to recurring price spikes until substantial new production comes online.
Developers targeting North American and Australian deposits are best positioned to attract capital. Their uranium production will be coveted by utilities seeking security and diversity of supply. Geopolitics has returned as a major priority given Russia’s outsized role in global uranium output.
After wrong-footing investors for years, uranium fundamentals are decisively turning positive. Powerful catalysts are converging to support a long-term bull market:
– Accelerating utility contracting tightly couples demand with prices
– Lead times prohibit supply from responding quickly to price signals
– Supply deficits are projected to periodically spike prices higher
– Geopolitics incentivize production from stable jurisdictions
– Given vast upside potential during past bull cycles, uranium equities offer an extremely asymmetric risk-reward proposition. As institutions recognize the compelling fundamentals, significant capital inflows could ignite the next major uranium bull run.
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