Uranium reaches a 15-year high. Nuclear energy comeback and what we need to know
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
The last time uranium price experienced such a surge was back in 2008, three years before the Fukushima nuclear accident. At that time, countries didn’t massively scale back the use of nuclear energy as they did following the catastrophe. However, it seems times have changed. What’s happened and what trade opportunities this new era can provide – you’ll find the answers in this piece.
The chart tracking uranium futures illustrates remarkable performance since the beginning of 2023, with an increase of over 50%. To put this in perspective, the gold spot price has risen by nearly 10%, while the S&P index has seen an uptick of around 8%.
The historical movements of uranium are illustrated in the following chart. As you can see, the last peak, similar to the current one, was witnessed in 2008. Then, there was a local hike that ended with the Fukushima nuclear disaster. This was followed by a decade in which it appeared that the world had largely abandoned nuclear energy.
When usage of a resource declines, it is reasonable to expect a drop in demand, which in turn affects the supply, namely uranium mining. Therefore, it makes total sense that when uranium regained prominence, the supply couldn’t keep up.
Where does the demand come from? The resurgence can be attributed to several factors that have emerged over the past decade and, particularly, in recent years. The Russian invasion of Ukraine stressed the need of allocating energy sources to reduce dependence on Russia, such as in the case of Russian gas.
At the same time, the global fight against climate change remains a pressing concern. It turns out that renewable energy sources, such as wind and solar, may not be sufficient. Therefore, NPPs are making a comeback.
Economically developed countries are extending the operational lifespans of existing reactors and commissioning new ones. Meanwhile, developing countries like India, Turkey, and China are actively building new nuclear power plants.
Moreover, it's evident that the lasting impact of the emotional aftermath of Fukushima has receded more rapidly due to a series of global shocks. In other words, both officials and the general public are now less anxious about nuclear energy.
Russia plays a pivotal role in the uranium market, involved in uranium mining, enrichment, and serving as a transit route for Kazakhstan's uranium producers. So, cutting ties with Russia increases pressure on the uranium market. To compound matters, the recent coup in Niger further disrupts uranium producti
It's highly likely that uranium demand will continue to rise in the coming years, and experts anticipate a corresponding increase in its price. Consequently, you might want to explore trading opportunities in the futures market or stock market. Look for companies associated with uranium mining and supply. Some noteworthy firms to consider include Denison Mines, with a consensus forecast of +56% for the next 12 months, Cameco Corporation at +23%, and Uranium Energy with a forecast of +22%.
However, like many commodities, uranium is sensitive to fluctuations in the USD rate and usually moves inversely to the strength of this currency. If the Federal Reserve doesn't initiate an interest rate decrease in 2024, it could exert pressure on uranium prices, potentially causing them to decline.