Over 10 years ago, a disaster in Japan cast a shadow on the future for nuclear energy and the uranium used to fuel it. But global efforts to reduce carbon emissions have revived interest in the power source.
“There are only a few options to produce electricity without releasing CO2,” and these include nuclear, says Jonathan Hinze, president at nuclear-fuel consultancy UxC. It is “almost impossible” to see how decarbonization can be achieved without inclusion of nuclear power, he says.
A major earthquake in March 2011 generated a tsunami that disabled the Fukushima Daiichi Nuclear Power Plant, leading to the worst nuclear disaster in a quarter century.
“After Fukushima,some believed the industry would go into a free fall, with many existing reactors closing and no new reactors built,” says Hinze. But nuclear power generation recovered to pre-Fukushima levels around 2019.
Nuclear energy has moved back into the spotlight, with climate change an increasing worry for a world ravaged by floods, droughts, and extreme weather events.
“As there is growing momentum to achieve net zero [carbon emissions], governments will soon realize that nuclear is currently overlooked,” says Bruno Brunetti, head of Global Power Planning Analytics, S&P Global Platts. China stepped up its efforts, with the nation accounting for over 60% of the new plants commissioned over the past decade, he says.
The World Nuclear Association said the globe’s roughly 440 nuclear reactors require some 79,500 metric tons of uranium oxide concentrate each year and in a 2019 report, it forecast a 26% increase in uranium demand from 2020 to 2030.
Demand from nuclear reactors is expected to increase by a few percentage points per year as new reactors come online, says John Ciampaglia, CEO of Sprott Asset Management. There’s also strong demand from non-utility buyers, with some uranium developers recently raising equity capital and “parking the proceeds into physical uranium.”
Weekly spot uranium prices stood at $39 a pound as of Sept. 6, the highest in over six years, up 30% year to date, according to UxC data. Among exchange-traded funds, the
Global X Uranium ETF
(ticker: URA) has gained more than 60% this year.
Ciampaglia expects utilities to be active buyers over the next two years as they “look to replenish expiring purchase agreements that were signed a number of years ago.” He says the
Sprott Physical Uranium Trust,
a closed-end fund (ticker: SRUUF) launched in July, is “attracting capital from investors who want to participate in the newly forming bull market in uranium.”
On Aug. 17, the trust, which now has $930 million in assets, launched an at-the-market equity program to issue up to $300 million of units of the trust in Canada. Since then, it has attracted almost $200 million in new capital from investors, Ciampaglia says.
That’s led to large purchases of spot uranium, says UxC’s Hinze. Given that the trust’s offering is for $300 million, it may be able to continue to raise cash regularly to use for future spot uranium compound purchases, he says. That’s a sign that prices will keep rising, “potentially quite rapidly in the coming weeks.”