The long-term uranium contract price is now around $79 per pound, the highest level since 2008, and it is expected to rise further in the coming months. The ongoing increase in uranium prices is due to supply uncertainties and a surge in power demand driven by AI data centers, which has also increased uranium demand from utilities.
Meanwhile, the spot price of uranium has risen nearly 88% over the past year, reaching a 14-year high of about $82 per pound in February 2024. The rapid increase in spot uranium prices began in 2022, when prices rose 41% to $49.81 per pound.
In order to ensure stable power for data centers worldwide, tech giants have secured clean energy supply through power purchase agreements, building small modular reactors, and investing in nuclear power companies. A Goldman Sachs Research report released in May this year predicted that the power consumption of global data centers currently accounts for 1-2% of total electricity consumption, but will grow by 160% by 2030. It is foreseeable that driven by the AI wave and the demand for clean energy, the share of nuclear power in the grid will rapidly increase, and correspondingly, the demand for uranium will also increase significantly.
From the most basic analysis of market supply and demand, according to the International Energy Agency (IEA), nuclear power generation is expected to almost double by 2050 in the context of the global clean energy transition, and supply should also double.
However, Plenisfer Investments disagrees.
According to their forecast, uranium prices must be at least 30% higher than the current marginal production cost of $90-$100 per pound to stimulate producers to invest in new projects. Thus, Plenisfer expects the uranium market to continue to experience supply shortages over the next decade. Data from the World Nuclear Association shows that the nuclear market is currently in a state of supply shortage, a trend projected to continue. According to their forecast, by 2030, global uranium demand will reach 83,843 tons, while production will only be 74,805 tons.
Robert Crayfourd, co-fund manager at uranium-focused investment company Geiger Counter, noted that companies like Uranium Energy Corp (AMEX:UEC) and Ur-Energy Inc (AMEX:URG) have limited supply but strong demand, thus continually pushing for higher prices or opting for direct spot sales.
