Why the uranium price is set to keep rising

Turmoil in Kazakhstan – the world's leading producer of uranium, has sent the uranium price up by more than 8% in a week. And that's not the end of it.

Kazakhstan’s “dominant” role in the uranium market is “akin to that of the Opec+ group in crude oil”, says Neil Hume in the Financial Times. So turmoil in the country has sent uranium prices up more than 8% in a week to $45.65 a pound. The country is the world’s leading supplier of the nuclear fuel, accounting for more than 40% of supply. Globally, utility companies use about 180 million pounds of uranium per year, but only 125 million pounds is being mined, partly due to “a lack of investment in new deposits”. For now, the shortfall is being made up with stockpiles and re-purposed “military warheads”.  

Supplies are secure

Still, disruption and shortages are unlikely, says Lucas Mediavilla in L’Express. The Kazakh mines are located in an isolated region far from the violence and no stoppages have been reported. What’s more, Kazakh uranium extraction is done by injecting liquid into the ground (a method similar to that used in oil fracking), says Teva Meyer, a nuclear specialist at the University of Haute-Alsace. Unlike large open-cast mines, this creates a relatively small surface footprint that is easier to secure against threats.

The risk of shortages in the short term is “minimal”, agrees Étienne Goetz in Les Echos. Nuclear power plants maintain large stockpiles of uranium fuel (known as yellowcake). Changes in uranium spot prices will also not feed through directly into electricity costs because industrial users overwhelmingly meet their needs through long-term contracts at previously agreed rates. 

A tighter market 

However, uranium prices are historically volatile, says Charles Archer for IG, varying from as high as $136 a pound in 2007 to a low of $18 a pound in 2016. The fuel has been in the doldrums during the decade since the Fukushima nuclear disaster, but things are changing as governments push to decarbonise the economy. Nuclear, which currently accounts for 10% of global electricity production, avoids the problem of intermittent production that dogs many renewables. China plans to build “150 new nuclear reactors over the next 15 years”, a significant addition to the 440 currently operating globally.

The launch last year of the Sprott Physical Uranium Trust in Canada shook up this opaque market, says Emily Graffeo on Bloomberg. The fund has seen “explosive growth”, enabling it to buy “almost a third of the world’s annual supply” and helping push up uranium prices by more than 30% last year. It now plans to raise and invest $3.5bn (£2.6bn) in the next two years. Taking the corresponding amount of uranium off the market “could seriously jack up prices”, says Alex Hamer in Investors’ Chronicle. UK-listed Yellow Cake (Aim: YCA), which follows a similar strategy, should benefit.

Recommended

Amazon halts plans to ban UK Visa credit card payments
Personal finance

Amazon halts plans to ban UK Visa credit card payments

Amazon has said that it is to shelve its proposed ban on UK customers making payments with Visa credit cards.
17 Jan 2022
Unilever slides and GSK bounces after GSK knocks back £50bn bid
UK stockmarkets

Unilever slides and GSK bounces after GSK knocks back £50bn bid

Unilever shares fell to their lowest level in around five years, after its £50bn takeover bid for GSK’s consumer health unit was rejected. 
17 Jan 2022
Cladding crisis: what new proposals for mean for housebuilders and leaseholders
Property

Cladding crisis: what new proposals for mean for housebuilders and leaseholders

The government has said that no leaseholder living in a block of flats more than 11 metres tall should “ever face any costs” for fixing dangerous clad…
17 Jan 2022
Ask for a pay rise – everyone else is
Inflation

Ask for a pay rise – everyone else is

As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why yo…
17 Jan 2022

Most Popular

US inflation is at its highest since 1982. Why aren’t markets panicking?
Inflation

US inflation is at its highest since 1982. Why aren’t markets panicking?

US inflation is at 7% – the last time it was this high interest rates were at 14%. But instead of panicking, markets just shrugged. John Stepek explai…
13 Jan 2022
Five unexpected events that could shock the markets in 2022
Stockmarkets

Five unexpected events that could shock the markets in 2022

Forget Covid-19 – it’s the unexpected twists that will rattle markets in 2022, says Matthew Lynn. Here are five possibilities
31 Dec 2021
Interest rates might rise faster than expected – what does that mean for your money?
Global Economy

Interest rates might rise faster than expected – what does that mean for your money?

The idea that the US Federal Reserve could raise interest rates much earlier than anticipated has upset the markets. John Stepek explains why, and wha…
6 Jan 2022