Over 10 years ago, a disaster in Japan cast a shadow on the future for nuclear energy and the uranium used to fuel it, but efforts across the globe to reduce carbon emissions have revived interest in the power source.
“There are only a few options to produce electricity without releasing CO2,” says Jonathan Hinze, president at nuclear-fuel consulting firm UxC, LLC. “These include: wind, solar, hydro, tidal, geothermal and nuclear,” It is “almost impossible” to see how decarbonization can be achieved without inclusion of nuclear power in the future, he says.
“There are only a few options to produce electricity without releasing CO2. These include: wind, solar, hydro, tidal, geothermal and nuclear.”
— Jonathan Hinze, UxC, LLC
A major earthquake in March 2011 generated a tsunami that disabled the Fukushima Daiichi Nuclear Power Plant, leading to the world’s worst nuclear disaster in a quarter-century.
“After Fukushima, some believed the industry would go into a free fall, with many existing reactors closing and no new reactors built,” says Hinze. There have been reactor closures, but the pace has “not been excessive,” and nuclear power generation recovered to pre-Fukushima levels around 2019, he says.
Nuclear energy has moved back into the spotlight, with climate change an increasing worry for a world that is been ravaged by floods, droughts and extreme weather events. “As there is growing momentum to achieve net zero [carbon emissions], governments will soon realize that nuclear is currently overlooked,” says Bruno Brunetti, head of Global Power Planning Analytics, S&P Global Platts. China stepped up its efforts, with the nation accounting for over 60% of the new plants commissioned over the past decade, he says.
The World Nuclear Association said the world’s roughly 440 nuclear reactors require some 79,500 metric tons of uranium oxide concentrate each year and in a 2019 report, it forecast a 26% increase in uranium demand from 2020 to 2030.
Hinze says there are “clear signs that China’s government and leading nuclear companies are committing to large scale nuclear expansion following the release of the country’s 14th Five Year Plan,” and UxC expects China to surpass U.S. nuclear capacity before the year 2030.
Demand for uranium from nuclear reactors is expected to grow by a few percentage points per year as new reactors come online, says John Ciampaglia, chief executive officer of Sprott Asset Management. There’s also very strong demand coming from non-utility buyers, with some uranium developers recently raising equity capital and “parking the proceeds into physical uranium.”
Weekly spot uranium prices stood at $39 a pound as of Sept. 6, the highest in over six years, up 30% year to date, according to UxC data. On the New York Mercantile Exchange, uranium futures settled at $40.05 a pound on Sept. 7, also up around 30% this year. Among the exchange-traded funds, the Global X Uranium ETF
has gained more than 60% this year.
Ciampaglia expects utilities to be active buyers over the next two years as they “look to replenish expiring purchase agreements that were signed a number of year ago.”
He also points out that the Sprott Physical Uranium Trust
a closed-ended trust launched in July of this year, is “attracting capital from investors who want to participate in the newly forming bull market in uranium.” He refers to the trust as the largest, most liquid physical uranium fund in the world, with $930 million in assets, up from $630 million when it started trading in July.
On Aug. 17, the trust launched an at-the-market equity program to issue up to $300 million of units of the trust in Canada. Ciampaglia says that since that date, the trust has attracted almost $200 million in new capital from investors.
That’s led to large purchases of new pounds of spot uranium, says Hinze. Given that the trust’s ATM offering is for $300 million, it may be able to continue to raise cash regularly to use for future spot uranium compound purchases, he says. That’s a sign that uranium prices will keep rising, “potentially quite rapidly in the coming weeks.”