Fresh Government Billions Drive Nuclear Stocks

Uranium spot prices remain up for the year as the world realizes nuclear energy is going to be a vital part of the mix going forward. 

Yet, U3O8 spot is trading near $47.65 per pound, still well below the average cost of production globally. 

In Germany, which vowed to phase out its nuclear fleet some two decades ago, and hastened the effort post-Fukushima, Chancellor Olaf Scholz acknowledged keeping the country’s three remaining reactors running “might make sense” lest the entire country turn into snowmen this winter as it faces a fuel crisis because of reduced flows of Russian gas. Those three reactors supply ~6% of German electricity needs and are much cleaner than the coal and lignite alternatives that have already been turned to there. 

The people agree. A poll of 5,000 Germans conducted by Civey on behalf of Der Spiegel found 78% of respondents backed the continued operation of the last three German reactors until the summer of 2023, with 67% of those questioned in favor of operating the reactors for another five years. 

It’s the same story now in Japan, which is facing similar energy shortages. In July,    Fumio Kishida, Japan’s prime minister, said he wanted to restart up to nine additional nuclear reactors to avoid an electricity shortage in the winter months. Pre-Fukushima, the country sourced around a third of its electricity from 54 reactors. Right now, only four are operating, supplying ~6% of the country’s electricity. The government wants that to be ~20% by 2030. 

As Japan and other countries are realizing, not only does nuclear provide stable baseload electricity, it’s going to be nearly impossible to meet climate goals without it. According to Tadashi Narabayashi, a professor at the Tokyo Institute of Technology, “If Japan is serious about achieving carbon neutrality, solar power will not be enough. Nuclear needs to be part of the mix.”

The US is realizing this too, with nuclear energy gaining favor on both sides of the aisle despite lack of agreement on most other topics. 

In California, Democratic Governor Gavin Newsom wants to extend the life of the two reactors at Diablo Canyon, which are currently scheduled to shut down in 2024 and 2025. The two plants provide 10% of the state’s electricity and are its largest sources of clean energy. Funds to do so would come from the $6 billion Civil Nuclear Credit program that was created as part of last year’s massive Bipartisan Infrastructure Law (BIL).

Small Modular Reactors (SMRs) are also on the horizon. In late July, the Nuclear Regulatory Commission moved to certify NuScale’s (NYSE: SMR) small modular reactor design. This marks the first such approval of an SMR. The reactor, which contains 12 modules that each produce 50 megawatts, is scheduled to be deployed at the Department of Energy’s Idaho National Laboratory and come online in 2029. The approval process began in 2016, which highlights the glacial pace at which these projects move. Government would do better to speed up these processes if it’s the faster pace of glacial melting they’re worried about. 

What moves faster are nuclear- and uranium-related stocks, especially now that the sector has received funding in the form of fresh billions from the Inflation Reduction Act (IRA). The new bill includes $30 billion in production credits to save dozens of existing reactors from early retirement on top of the $6 billion in last year’s infrastructure bill. The IRA also includes tax credits for production by and investment in new advanced reactors, as well as $700 million in funding to support research in high-assay low-enriched uranium fuel. 

Already, we’re seeing bidding wars develop in the space, which is a sign of things to come. 

That’s why we’re positioning in these top uranium stocks now.

Call it like you see it,

Nick Hodge

Nick Hodge
Publisher, Daily Profit Cycle