Atomic Power: Is Uranium’s Long, Slow Demise Set to End?

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Commodities, Supply & Demand

Could uranium demand and prices be set to take off over the next few years?

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Currently prices are languishing at 13-year lows due to excess raw material supply and the after effects of Japan’s Fukushima disaster which resulted in the mass idling of Japan’s nuclear reactors.

Nuclear may be thought of as yesterday's technology, but its emission-less power generation makes it attractive. Source: Adobe Stock/mandritoiou.

Nuclear may be thought of as yesterday’s technology, but its emission-less power generation makes it attractive. Source: Adobe Stock/mandritoiou.

According to a London Telegraph article, the resulting low prices have encouraged utilities to become “uncovered,” meaning with a low spot price they have resisted locking themselves into long-term contracts.

Analysts at Cantor Fitzgerald said up to 80% of the uranium market could be uncovered by 2025, leaving consumers scrabbling for supply with prices rising sharply at the end of the decade. As so often with cyclical commodity prices, the low-priced environment has discouraged exploration activity for uranium and it’s believed that the dearth of new projects in the pipeline could result in a chokepoint within a matter of years.

Larger reactors in the U.S. and Europe are coming off long-term supply contracts in 2018 only to hit the spot market while China is building some 60 reactors that will be coming to the market for the first time in the near future.

Even today, with ample supply, questions remain about some producing countries’ long-term viability. Kazakhstan is said to be by far the largest supplier to Europe providing some 27% the region’s needs.

Russia and Niger are also major producers and while Russia has proved a reliable natural gas supplier to Europe, it’s growing hostility to the continent raises questions about its long-term desirability as a supplier of yet another energy resource. Fortunately, Australia has the largest known uranium reserves with ample scope for raising production if demand requires it. But the country is becoming a less competitive source for commodities of all kinds with rising wage costs and environmental restrictions.

Some would suggest the move to renewable energy is negating the need for atomic power, but until such time as cheap and reliable large-scale electricity storage technology comes of age, baseload power production has to be supplied by nuclear, coal or natural gas.

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The same policies that are driving investment in renewable energy are also working against coal and natural gas. Particularly for emerging markets like China and, in time, no doubt India where massive coal power plant investment has resulted in unknowable levels of atmospheric pollution. Nuclear-power continues to offer an attractive alternative. The long slow decline of uranium prices has taken some 13 years to reach its current nadir, the reversal may not take so long.

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