MettaInsights: Uranium
With CO2-heavy non-renewable energy sources becoming a political taboo, could nuclear be considered a greener alternative? What could that mean for the price of uranium?
What is Uranium?
Uranium is a silvery-white metallic chemical element in the periodic table, with atomic number 92. It is assigned the chemical symbol U. A uranium atom has 92 protons and 92 electrons, of which 6 are valence electrons. Uranium has the highest atomic weight (19 kg m) of all naturally occurring elements. (1)
Uranium occurs naturally in low concentrations in soil, rock and water, and is commercially extracted from uranium-bearing minerals such as uraninite. Uranium ore can be mined from open pits or underground excavations. The ore can then be crushed and treated at a mill to separate the valuable uranium from the ore. (1)
What is Uranium Used For?
The main use of uranium in the civilian sector is to fuel nuclear power plants. One kilogram of uranium-235 can theoretically produce about 20 terajoules of energy (2×1013 joules), assuming complete fission; as much energy as 1.5 million kilograms (1,500 tonnes) of coal. (2)
Price Performance in 2021
The price of one pound of uranium on January 1 this year was $36.5. A multi-year high of a little over $50 per pound was reached in September representing an increase of 37%.
What caused the price increase?
Forecast
While uranium demand is not immune to economic downturns, it is less exposed than other industrial metals and commodities. The bulk of demand is distributed across some 445 nuclear power plants operating in 32 countries, with supply concentrated in a handful of mines. Kazakhstan is easily the largest producer with over 40% of output, followed by Australia (13%) and Namibia (11%). (4)
There are several factors that contributed to the price increase of uranium this year. The first one relates to other energy commodities such as coal (up by 270%) and natural gas (up by 120%) becoming more expensive. This has inadvertently improved the competitiveness of nuclear power. China has already announced commitment to several new nuclear energy plants. If more countries follow suit, the price prospects of uranium will improve further.
Another factor that could push uranium prices further up is the successful commercialization of the small modular reactor technology. Small modular reactors (SMR) are considered to represent the next generation of nuclear power plants. They are smaller than conventional nuclear reactors and typically have an electrical power output of less than 300 MW. They also provide benefits in terms of reduced necessity for on-site construction, increase containment efficiency, and are claimed to enhance safety. (5) Proponents of the technology believe that the technology could help governments reach their CO2 emission targets, greatly reduce investment in terms of cost and time for building a traditional power plant, and they can better handle the variable nature of wind and solar power as SMRs are easier to turn on and leave running. (6) A number of countries are already heavily exploring the technology, and if successful, a nuclear energy renaissance could follow.
Finally, uranium’s price rise could also be partially attributed to a supply shock. Due to the previously low prices, uranium mines around the world have been mothballed for several years. For example, Cameco, the world’s largest publicly listed uranium company, suspended production at its McArthur River mine in Canada in 2018. (4) Global supply was further hit by COVID-19, with production falling by 9.2% in 2020 as mining was disrupted. At the same time, since uranium has no direct substitute, and is involved with national security, several countries including China, India and the US have amassed large stockpiles — further limiting available supply. (4)
The World Nuclear Association projects uranium demand to reach 206 million pounds in 2030 and supply to drop 50% by 2030 due to lack of investment in new mines. (3)
All this bodes well for the price of uranium this decade and beyond.
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References:
- Office of Nuclear Energy. Nuclear Fuel Facts: Uranium. Accessed on 05.11.2021. URL.
- Wikipedia. Uranium. Accessed on 05.11.2021. URL.
- Trading Economics. Uranium. Accessed on 05.11.2021. URL.
- Jones, Edwar Thomas et al. Uranium: what the explosion in prices means for the nuclear industry. September 2021. Accessed on: 05.11.2021. URL.
- Wikipedia. Small modular reactor. Accessed on 05.11.2021. URL.
- Parshley, Lois. The countries building miniature nuclear reactors. BBC.com. March 2020. Accessed on 05.11.2021. URL.
