Over the past five years, the price of uranium has risen by 208 per cent, although it has seen a 27 per cent correction from recent peaks since the beginning of this year. Over the same period, the Global X Uranium ETF has gained 177 per cent. The rise in uranium prices has been driven by two main factors: declining production and plans to increase consumption of the commodity in developed countries.
Table of contents:
- The future of the uranium market
- What is driving the uranium price up?
- The nuclear market has stagnated for 20 years!
- The average age of power plants has exceeded 30 years!
- Long-term projections of uranium price developments
Source: Tradingview
The future of the uranium market
A World Nuclear Association report indicates that uranium demand will increase in the coming years due to plans to develop nuclear power as a low-carbon source. At the recent COP28 conference in Dubai, 25 countries announced their intention to triple global nuclear capacity by 2050. Implementing these plans could significantly increase demand for uranium both to supply new reactors and to extend the life of existing units. The largest increase in demand is expected in Asia, particularly in China and India, where 26 and eight new reactors are under construction respectively. In addition, US technology giants such as Alphabet, Meta, Amazon and Microsoft have announced investments in nuclear power and co-funding the construction of small modular reactors (SMRs) to secure the energy needs of data centres supporting the development of artificial intelligence. However, the pledged contribution of large technology companies is still small in relation to global demand. Uranium demand is estimated to increase by 27 per cent by 2030 and by 38 per cent in the next decade.
Source: Tradingeconomics
What is driving the uranium price up?
However, the main factor driving uranium prices up is the continued decline in uranium production. About two-thirds of global uranium production comes from Kazakhstan, Canada and Australia, with Kazakhstan accounting for about 45 per cent, Canada for 15 per cent and Namibia for 11 per cent of global production. Between 2018 and 2022, uranium production declined by 8.8 per cent, with the result that current production meets only about 70 per cent of global demand, with the remainder supplied by recycling and existing reserves.
Source: World Nuclear Association
The nuclear market has stagnated for 20 years!
Although uranium prices fluctuate, demand for this raw material has remained stable over the past two decades. The demand outlook depends mainly on the number of operating reactors and their capacity, which has remained stable since the Fukushima disaster in 2011. The United States currently has the largest number of reactors (94), followed by France and China (56 reactors each).
Source: World Nuclear Association
The average age of power plants has exceeded 30 years!
However, it is worth noting that many Western reactors are ageing and may be decommissioned in the coming years, potentially negatively impacting uranium demand. Current projections suggest that the number of new reactors will almost offset the number of units scheduled for shutdown. However, new reactors are much more efficient, which affects uranium demand. The average age of an operating reactor is now over 30 years, with some of the oldest reactors being over 50 years old. These older units are much less efficient than the newer reactors being built mainly in China and India.
Source: World Nuclear Association
Long-term projections of uranium price developments
Analysts at Invest.Conotoxia.com highlight that the growing demand for nuclear energy in Asian countries and ongoing uranium supply shortages support long-term price increases for this resource and positively impact the fundamentals of uranium mining companies. As a result, further price increases for uranium appear highly likely.
Grzegorz Dróżdż, CIIA, Market Analyst of Conotoxia Ltd. (Conotoxia investment service)
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