Kazakhstan is often called the Saudi Arabia of uranium. In fact, its market share, at more than 40% of the world’s nuclear fuel, is not far from the share of the oil market held by the Organization of the Petroleum Exporting Countries and Russia combined. So when riots followed by severe repression shook the country earlier this month, buyers shook off the metal. Spot uranium prices rose 8% on January 5 alone to $ 45 per share. pounds according to UxC, a data provider. With protests now interrupted, the market has settled. Nevertheless, the commodity, often called “yellowcake”, seems to be going through a turbulent decade.
The immediate impact of the Kazakh unrest may be limited. Although the protests took place far away from uranium-producing regions, a small decline in global production is nonetheless likely. To extract uranium, Kazakhstan uses a method that involves pumping acid into the soil to dissolve the ore, recovering the solution and then using chemicals to separate the metal. Disruptions in the shipment of connections and equipment due to stranded trains or communication problems may have slowed operations.
Any deficiency may not mean much for now. Large buyers of uranium, such as China and France, which are major consumers of nuclear fuel, have several years of stocks. The most vulnerable utilities could borrow from foreign peers in the event of an immediate shortage, Toktar Turbay reckons from CRU, a consulting firm. Most of them buy nuclear fuel using long-term contracts that largely isolate them from short-term jumps in spot price. All this creates a buffer against a squeeze.
Yet events in Kazakhstan, which for decades was the world’s most stable uranium supplier, could ultimately lead buyers to guard against the risk of relying too much on a single source. There may come a day when the Kazakh government falls or state assets are attacked (Kazatomprom, the country’s only uranium producer, is 75% owned by a sovereign fund). Some consumers therefore seek to diversify their sources of supply. As Kazakhstan is by far the lowest producer, this will mean paying a premium.
An increase in aggregate demand may raise prices further. From Belarus to Bangladesh, many new markets are embarking on nuclear power to help them decarbonize. China is planning 150 new reactors over the next 15 years. Even in the West, which has long been ambivalent about nuclear energy, attitudes may change. The European Commission plans to classify nuclear power as green in its “taxonomy” for investors, which could direct funds to new projects. NuScale, the first company to seek to commercialize small, modular reactors to be approved by U.S. regulators, is preparing to go public (through a merger with a special purpose acquisition company).
In addition to the short term, supply may not be able to increase rapidly enough to satisfy greater appetite for the metal, further supporting prices. New mines are planned in Africa and America, but they require a price of at least $ 50-60 per tonne. pounds of uranium to be profitable. If an increase in demand of 2% per year between now and 2030 – a conservative estimate – is to be met, then all these projects must be underway, says Tim Bergin from Calderwood Capital, a hedge fund. That may not be realistic. Such a mine of Comeco's many , in Canada, lies beneath a lake; another involves freezing the soil up to 400 feet below the surface. The price of fissile fuel can become increasingly flammable.
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