March 7, 2023
There’s a major shift underway in the global nuclear energy market.
The world is quickly realizing that lofty climate goals will be impossible to meet without clean-burning, carbon-emission-free nuclear energy being an integral part of the clean-energy mix.
That fact is adding escalating pressure on an already constrained global uranium supply.
With uranium, what we arrive at is a market that’s consuming close to 200 million pounds annually — yet producing only around 135 million pounds.
That equates to a 65-million-pound structural deficit this year… which, when compounded over the next seven or eight years to the end of the current decade, balloons to a jaw-dropping 400 million-plus pounds.
That’s a staggeringly large deficit… and it underpins the growing need for new domestic uranium sources reaching the supply chain.
And it’s really only the start.
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On the demand side, we’ve got Japan looking to restart forty of its reactors. The island nation is also seeking ways to safely extend the plant-life of its existing reactor fleet from 40 to 60 years.
China just approved the construction of six new nuclear reactors across three provinces with plans to build 150 new reactors over the next 15 years as part of their newly-enhanced decarbonization mandate.
Europe, India, and South Korea have also joined the fray and are now fully onboard with a cleaner energy future that will require vast amounts of uranium, or U3O8.
Here at home, TerraPower is currently constructing a $4B nuclear power plant in Wyoming that’ll use an all-new blend of enriched uranium.
Once completed, it’s expected to generate efficient, low-cost, clean energy while utilizing enhanced safety standards that greatly reduce the risk of accident — even on par with wind power plants.
And just weeks ago, NuScale became the first company to be granted approval by the US government on small modular reactor (SMR) design with the US Nuclear Regulatory Commission giving it the green light.
Put plainly, increased uranium demand is coming from ALL angles. And that includes a new contracting cycle that’s just now getting underway with major utilities entering the market to secure their next long-term U3O8 contracts.
Next, you have to look at the precariousness of the global uranium supply to really get the full picture.
Kazakhstan — a former soviet republic and the world’s largest uranium producer — produces roughly 40% of global supply. Last year, as you may recall, the country erupted into what’s now known as ‘Bloody January’ wherein over 225 people were killed in a government crackdown on nationwide protests.
Cameco, which owns 40% of the giant Inkai uranium mine in Kazakhstan, had this to say:
“As 40% of the world's uranium supply, any disruption in Kazakhstan could of course be a significant catalyst in the uranium market. If nothing else, it's a reminder for utilities that an over-reliance on any one source of supply is risky. It also reinforces the shift in risk from suppliers to utilities that has occurred in this market.”
It’s that type of geopolitical chaos that’s leading to increased energy insecurity around the world as supply comes under increasing pressure, particularly in the global uranium market.
Supply is being further constrained by companies seizing on the opportunity to purchase massive amounts of drummed uranium in the spot market with Sprott Inc. acquiring some 55M lbs over the last couple of years — and with others like Yellowcake PLC and Uranium Energy Corporation following suit.
As a result, uranium inventories are continuing to shrink, most notably from 3.5 years of supply to around 2 years of supply right here in the United States.
We also talked about restarts and lifespan extensions on reactors… and it’s not just Japan that’s going down that road.
In California, steps are underway to potentially extend the life of the Diablo Canyon reactor for an additional 5 years from 2025 to 2030. The same exact thing is happening in countries such as Belgium, Finland, and Slovakia.
All of that is to say that any further disruptions to the global uranium supply chain could lead to a massive run on uranium spot prices — just like what we saw back in 2006-07 when uranium soared to US$140 per pound upon the flooding of Cameco’s Cigar Lake uranium mine.
That upsurge caused the share prices of select uranium mining companies to literally go through the roof… resulting in life-changing gains for investors.
We’re currently right around US$50 per pound. A couple of years ago, uranium prices were languishing at the US$30/lb level. So the uptrend is undoubtedly underway.
With geopolitical upheaval at an all-time high in key uranium producing countries, including Russia (which, at any time, could have its uranium exports sanctioned by the United States), the writing’s clearly on the wall for higher uranium prices going forward.
Importantly, from an investor standpoint, we haven’t seen that really big move in the uranium spot price — just yet!
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It could end up being a steady climb toward US$100/lb or we might get that giant spike similar to what we witnessed back in 2006-07.
Either way, it’s still early-innings in the current uranium boom, which means now is an opportune time for uranium investors to begin positioning for what could be some of the largest sector gains we’ve seen in nearly two decades.
For a head start on your uranium investing due diligence, our team has put together a brand new, full-length report on the uranium sector — complete with what we believe are some of the best uranium stocks for 2023 gains.
Like I said, it’s early-innings… so there’s never been a better time to explore the wealth-building potential of what looks to be one of the hottest market segments of 2023.
Editor, Daily Profit Cycle