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Decarbonization is turning to nuclear energy, which will propel uranium prices higher - Scott Melbye
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(Kitco News) - The Russia-Ukraine conflict has made energy security a major priority for the United States and Europe, and it’s supporting new investment and development in the nuclear energy sector and increased demand for uranium, according to Scott Melbye, Executive VP of Uranium Energy Corporation and President of the Uranium Producers of America.
“I think Russia-Ukraine really was a wake-up call globally, that energy security really is national security,” he said. “Germany has really stepped in it over the last 10-15 years, moving to this ‘energiewende’ energy policy, which was to move away from fossil fuels, move away from nuclear energy, and rely 100 percent on renewables. Instead what it's resulted in are electricity prices almost double their neighboring country France, where it's almost all nuclear, they've made no measurable dent in carbon emissions which was one of the key objectives of that program, they're burning more coal today than they ever have.”
Melbye said this policy also resulted in Germany becoming completely reliant on Russian natural gas, which compromised them in the early stages of the invasion. “We all see what can happen if we don't take energy security seriously. But in the United States and Canada, in North America, we have abundant supplies that we should be making greater use and reliance on here, to get our own energy security in better shape.”
Melbye spoke with Kitco News journalist Ernest Hoffman at the recent PDAC 2023 mining convention in Toronto, where he said decarbonization and the growth of clean energy will drive demand for uranium.
“Any commodity should be measured by the supply and demand fundamentals, and those fundamentals for uranium… I'm coming from almost 40 years in the uranium and nuclear energy industry, and I've never seen the fundamentals set up as well as they are today,” he said. “We have demand now increasing again from conventional reactors, 3-4% growth in uranium requirements annually, even before we get to the small modular reactors and advanced reactors that are going to be a huge, huge source of demand towards the end of this decade and into the next. But the large reactors, we've added 66 globally over the last nine years, and we have 58 more under construction.”
Melbye said that having operations based in North America helps to mitigate the effects of deglobalization while building out a secure supply pipeline. “As mining companies, we have to go where the geology is, but not all places with great geology are great places to operate mining businesses,” he said. “We very early on focused on uranium in the United States of America, and focused on a particular type of technology called in-situ recovery, which is very prevalent in the western United States. We focused on Texas with our early operations there, we've moved now into Wyoming, and have even made major steps into Saskatchewan, Canada. There's no surprise that those are the three best uranium mining jurisdictions in North America.”
Melbye said that the uranium market was oversupplied for several years, with a large inventory overhang, but he sees a production-driven market in 2023.
“Now the price formation will be determined by cost of production, time to production, permitting, licensing, political risk, all those things, and we're quite confident that going into this new period, we probably need eight to ten new mines coming online globally in the second half of this decade. So we definitely see the makings of a very real supply squeeze in 2024, 25 and 26. I think the story used to be ‘the market is rebalancing, be patient’ to the point where now the market has rebalanced, and we should see real dramatic price movement in the spot market.”
Melbye said that he sees the political will on both sides of the aisle to support nuclear energy in the coming years. “I've worked, through the Uranium Producers of America, with numerous administrations, numerous congressional delegations from the Republican and Democratic side, and I've never seen the support for revitalizing the domestic nuclear fuel cycle in the United States.”
To hear Melbye’s price expectations for uranium, watch the video above.
