How Russia can blow up the uranium market

Nuclear and militarization are scary words to say together, even in the context of energy.

This fear is driving a rally in a key fuel that has yet to be hit by a physical shortage. Uranium oxide prices soared to $57.50 a pound, levels not seen more than a decade ago before the Fukushima disaster turned global sentiment against nuclear power. They have increased by more than a third since Russia invaded Ukraine. Shares of Canadian uranium miner Cameco CCJ 1.78%

increased by 29% since the beginning of the year, while Sprott Physical Uranium Trust,

UUT 0.62%

a fund that holds physical uranium, is up 31%.

The immediate catalyst is the fear that Russia’s uranium supply could be cut off. On Thursday, a group of US senators introduced a bill to ban imports of its uranium and on Monday Russian Deputy Prime Minister Alexander Novak said the country was considering banning uranium exports to the United States. United as part of its sanctions response, according to Reuters.

Russia is actually not a big producer of uranium ore, the substance that is mined from the ground, with a 6% market share in 2020, according to the World Nuclear Association. Jonathan Hinze, president of uranium market research firm UxC, notes that the country typically uses the uranium it mines domestically for its own reactors. But it is a crucial supplier of secondary uranium, which includes so-called previously processed uranium tailings that can be enriched. And Russia has by far the largest enrichment capability, with about 43% of the world’s operational and planned capability located there, according to the World Nuclear Association, more than France, Germany, the Netherlands. Bas and the United Kingdom together. A ban on uranium ore imports from Russia would be manageable, but full sanctions against Rosatom, the Russian nuclear energy company that also owns the Tenex enrichment unit, would be far more disruptive.

The global oversupply of enrichment capacity is a contributing factor in keeping demand for uranium ore low. Much of that surplus is in Russia, according to the World Nuclear Association. Enrichment can, to some extent, substitute for freshly mined uranium ore. While enrichment can be compared to an orange-squeezing machine, uranium ore mined from the ground is like fresh oranges, while tailings, or previously processed uranium, can be thought of as half squeezed with juice.

Because Russia has abundant and cheaper enrichment capacity, it is able to continue to pass spent tailings through its system. Without this supply, the remaining enrichment facilities might start needing more ore – fresh oranges – to produce the same amount of enriched uranium. Whether or not sanctions are imposed, Western utilities may be more inclined to source elsewhere under future contracts to ensure security of supply. Andrew Wong, analyst at RBC Capital Markets, said in a report that with the sanctions, demand for uranium in the United States could theoretically increase by 10 to 15 million pounds per year, or about 30% of annual demand. typical.

But that’s not all. Russia’s invasion has bolstered support for nuclear power as Europe seeks to wean off its dependence on Russian natural gas without increasing greenhouse gas emissions. Belgium recently postponed its exit from nuclear energy for 10 years. Last month, France announced plans to build six new reactors, as British Prime Minister Boris Johnson seeks to accelerate the country’s nuclear power plans. Arthur Hyde, partner at resource-focused hedge fund manager Segra Capital, notes there’s been a “tidal wave of shift in sentiment in favor of nuclear power” that hasn’t been seen since. the energy crisis of the 1970s.

It will be difficult, however, to shake off the association of nuclear energy with disasters. Three Mile Island, Chernobyl and Fukushima have each held back the progress of the industry. Russia’s attack on a nuclear power plant in Ukraine reiterated these concerns. This could, however, be a rare moment when new geopolitical fears outweigh the fading memories of those crashes.

Write to Jinjoo Lee at

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