'Chaotic to the upside': The World Nuclear Association says uranium demand will double by 2040

Uranium demand could surge as governments in North America, Asia and Europe back an expansion of nuclear energy

US mining investors Goehring and Rozencwajg predict ‘chaotic’ move to the upside for uranium prices

Yellowcake spot price has steadily increased across 2023, hitting year high of US$62.13/lb yesterday

The World Nuclear Association has laid out its case for a massive expansion of uranium mine developments, projecting a near doubling in demand by 2040, while a pair of US mining investors have predicted prices for yellowcake could rise “three to four times”.

In a report last week, the first Nuclear Fuel Report issued by the WNA since before the Russian invasion of Ukraine in 2022, the WNA said reactor requirements for uranium would lift from 65,650t in 2023 to 83,840t in 2030 and 130,000t in 2040 just on a scenario based on government and utility targets.

A lower demand scenario would see requirements rise to 71,000t in 2030 and 87,000t in 2040, while a more bullish upper scenario would see demand lift to 100,500t in 2030 and 184,300t in 2040. Wowzers.

“The more positive projections are based on increasingly favourable governmental policies over the last two years around the world to encourage energy sources with zero or low-carbon emissions,” the WNA said.

“Although a small number of countries have phased out or are still committed to phasing out nuclear, overall there is a growing recognition that nuclear energy is needed to mitigate climate change and reduce air pollution.

“Extension of reactor operating lifetimes has been an increasing trend in many countries including those with large nuclear reactor fleets, such as Canada, France, Japan, Russia, Ukraine, and the USA.

“Moreover the prospects for new reactors worldwide have improved while many new countries have demonstrated a strong interest in developing a nuclear power programme.”

At the same time supply has been falling off a cliff, sinking almost a quarter from 63,207t in 2016 to 47,731t in 2020 before a slight rebound to 49,355t in 2022, while uranium exploration spending plummeted 88% from US$2.12b in 2014 to just US$251m in 2020.

Such is the quandary for the market.

So what does that mean for prices?

That’s not really the WNA’s place to say.

Lucky we’ve got a couple of freewheeling Americans in our corner.

Goehring and Rozencwajg in the investors’ second quarter market commentary predicted prices could move “chaotically to the upside”.

Uranium has moved forward 12% over the past 12 months despite a shift downwards for virtually every other energy commodity, with oil, natural gas and coal tumbling 30-70% from last year’s record highs.

Spot prices have risen consistently since March and are already up 4% in September to a multi-year high of US$62.13/lb according to Numerco.

“Our models suggest uranium’s strong performance has just started. Uranium has likely reached a pivotal inflection point that could force the price higher by as much as three- to four-fold over the next several years,” Goehring and Rozencwajg reckon.

“For the first time in history, uranium has slipped into a persistent and widening deficit. We believe the results will be dramatic.”

The introduction of financial players like Sprott who have leapt on a stretched uranium market to lock up secondary supply sitting in inventories on the spot market has served to further tighten the screws.

“Unlike open-ended funds such as the GLD, the financial uranium vehicles are closed-ended, meaning the material cannot readily flow back into the commercial market. Once material is purchased it is permanently locked up,” Goehring and Rozencwajg said.

“As a result, the uranium market experienced a deficit of nearly 180Mlbs between 2020 and 2023. The deficit was met by materially depleting the commercial inventories that had accumulated following Fukushima.

“By the end of this year, we expect commercial inventories will be back to 250Mlbs, covering reactor demand by less than 18 months. The last time commercial inventories reached these levels in the mid-2000s, prices spiked to their all-time highs of US$145 per pound. We expect the same now.”

While reactor demand from plants under construction is expected to grow from 180Mlbs today to 240Mlbs by 2030, G&R say. But if supply of all primary production is returned to its maximum capacity (i.e. dormant mines like Boss’s Honeymoon in South Australia are restarted), the supply side would only grow from 140Mlbs to 174Mlbs.

“The cumulative deficit between 2023 and 2030 will likely exceed 250 mm lbs, completely depleting all commercial stockpiles,” G&R said. At current prices, even after a more than three-fold rise from the decade lows of US$18/lb seen in 2018, greenfield developments would still not be economic. And as far as existing mines go, the WNA’s reference case shows production only growing to 54,000t in 2030, well below 2016 levels, and a withering 26,000t in 2040.

“The uranium industry has been dramatically starved of capital for many years. In our view, the persistent bear market – in many ways present since the 1980s with only a single reprieve – is over. Investors should act accordingly,” G&R bullishly stated.

How big will the reactor fleet grow?

So mined supply, it seems, is struggling to keep up with a newfound enthusiasm for nuclear energy linked to the energy transition — nuclear delivered 10% of global electricity needs in 2022, but 25% of so called ‘low-carbon electricity’, the WNA claims.

They note it takes between 8-15 years for a discovery to become an operating mine.

Since 2021, all of the WNA’s demand scenarios have been upscaled. Pic: WNA

While supply from existing mines is expected to be on a downward trend, reactor capacity is expected to expand.

Efforts to extend the life of existing reactors in places like the US have also proceeded with increasing urgency.

“In the USA, the government provided utilities with unprecedented support to preserve nuclear plants from premature closures,” the WNA said.

“Sixty-three units are envisaged to operate for 80 years (39 reactors in the 2021 edition of The Nuclear Fuel Report).

“In other words, no reactor will be shut before the end of the forecasting period in the Reference Scenario. Moreover, five large scale reactors (2036-2040) and three SMRs (2032) are expected to be built.”

As of June 2023 the WNA says 437 nuclear facilities were in operation representing 391.4GWe of capacity.

The total under construction comes to 63 for 63.8GWe, over half of those plants in China and India.

In its reference scenario, the WNA expects there will be 474 plants in operation by 2030 and 656 by 2040 (685.8GWe), with even its lower scenario projecting more plants by 2030 (433) and 2040 (493) (486.3GWe).

In the WNA’s upper scenario the number of nuclear facilities worldwide hits 519 by 2030 and more than doubles to 841 by 2040 (931.3GWe).

By 2040 as much as 80GWe of new capacity could be added in the latter half of the 2030s from the development of small modular reactor technology, a new forecast in the 2023 report.