In 2023, the spot price of uranium soared from less than $50 per pound to more than $90 by the end of the year. Since the Fukushima nuclear accident in Japan in 2011, the energy commodity has fallen out of favor, and although prices have risen steadily in the past few years, it was in the second half of last year that it broke out. What was the trend that drove uranium prices up last year? Can uranium prices continue to rise in 2024?
But before we do that, let’s review the uranium market in 2023.
Simply put, the surge in uranium prices last year was the result of a combination of supply and demand factors.
Let’s start with supply. Due to the long-term downturn in uranium prices, many uranium mines have stopped production or reduced production, and it takes time to resume production, while new development projects take longer to put into operation. Therefore, the uranium market is now a seller’s market.
Not to mention these, supply chain security has exacerbated the tight supply and demand situation in the uranium market. For example, although Russia is the sixth largest uranium producer in the world, it plays a key role in enrichment and conversion. After the outbreak of the war between Russia and Ukraine, the United States sought to reduce its dependence on Russia for uranium supply, and in December last year the U.S. House of Representatives even passed a bill banning the import of enriched uranium from Russia. In addition, in August 2023, a military coup took place in Niger, the seventh largest uranium producer in the world.
As for demand, uranium demand continued to grow last year and is expected to grow significantly in the future. According to the World Nuclear Association (WNA), reactor demand in 2023 is about 65650 tons, and by 2040, it is expected to increase to nearly 130000 tons, with an upper limit of 184300 tons and a lower limit of 87000 tons. Data from the World Nuclear Association also show that there are about 440 reactors in operation worldwide, 60 under construction and 110 planned, mostly in Asia.
Looking forward to the future, under the background of global energy transformation, nuclear power and uranium will occupy a larger proportion in the energy composition.
After the uranium price broke through $90 in 2023, it has basically become a consensus that it will continue to rise in 2024, and now it is only a matter of how fast or slow it will rise. As a possible catalyst for the rise in uranium prices, various financial entities and hedge funds, such as Yellow Cake (LSE: YCA) and PFYN Capital, as well as financial instruments such as Sprott Physical Uranium Trust (U. U), may be behind it. The trust currently holds U3O8 in 63,161,826 pounds, with a total net asset value of $5.95 billion.
In addition to the boost from financial markets, small modular reactors (SMRs) are also expected to be a key source of future uranium demand. China has its own plans to build reactors, India is not far behind in this regard, and even Saudi Arabia intends to build reactors.
Fast money has been earned, and then want to continue to make money will put forward higher requirements for investors’ stock selection.
Companies such as NexGen Energy Ltd (TSX: NXE, NYSE: NXE) and Fission Uranium Corp (TSX: FCU, OTCQX: FCUUF), Or a company like Boss Energy (ASX: BOE, OTCQX: BQSSF) that is already in production and has much more potential than a feasibility study. In addition, low-leverage uranium sellers are worth watching, focusing on miners that have uranium to sell today and are expected to grow exponentially in the future, such as Uranium Energy Corp (AMEX: UEC) and Energy Fuels Inc. (TSX: EFR, NYSE: UUUU).
If the uranium market begins to attract the influx of ordinary investors, the investment potential of various funds, such as Global X Uranium ETF (URA) and Sprott Uranium Miners ETF (URNMM), can not be ignored. And Sprott Physical Uranium Trust.
Finally, if you are willing to take more risks and reap higher returns, more speculative Explorer stocks are more suitable. If exploration results are positive, the potential yield of these stocks can be several times that of producers. Of course, the price is that you may suffer huge losses.
