The uranium spot price took a leap in 2023, rising from below US$50 per pound to close the year above US$90.
The energy commodity fell out of favor after the Fukushima nuclear accident in 2011, and although prices have been rising fairly steadily over the last few years, they started increasing in earnest during the back half of 2023.
How did uranium perform in 2023?
Uranium’s sizeable price jump in 2023 came as various supply and demand factors converged.
Excess inventory created by the Fukushima incident has finally dried up, and nuclear utilities are ready to sign new long-term contracts with uranium producers. However, material isn’t necessarily readily available — many companies cut output or took their mines offline entirely when uranium prices were lower, and restarting production isn’t quick.
‘That’s great, those are the easy pounds to find,’ he continued. ‘The hard pounds are the new projects, and that’s because you need to raise a lot of capital to fund the financing of the construction. Those construction projects are obviously very complex engineering endeavors, and they obviously take many years to come online.’
Uranium price from January 1, 2023, to December 31, 2023.
Chart via Cameco.
‘There has been for many years lots of excess supply in the spot market. Utilities have been able to just pick up supply in the spot market to cover those future demands. Now we’re getting more into a contracting situation,’ she said in November. ‘Everything is really set up, it’s a seller’s market right now. It’s just very tight.’
Adding complexity is the growing emphasis on supply chain security. While Russia is only the sixth largest uranium-producing country, it has key roles in enrichment and conversion — its invasion of Ukraine in February 2022 highlighted the potential fragility of uranium supply, and countries like the US have been looking to reduce their dependence on Russia since then. In December, the US House of Representatives approved legislation that would ban imports of enriched uranium from Russia 90 days after enactment, and while it still requires Senate approval, many market participants are confident it will be successful. If it passes, Russia may put its own ban on exports of uranium to the US.
Niger, the seventh largest uranium producer, also made headlines in 2023 due to supply concerns. In August, a military coup in the country worried investors, although companies operating there reported no disruptions.
Against that supply backdrop, uranium demand continued to grow this past year and is set to increase substantially moving forward. The World Nuclear Association (WNA) expects reactor demand to come in at about 65,650 metric tons (MT) in 2023, with that amount rising to nearly 130,000 MT in 2040 in its reference scenario, which is based on government and utility targets. The WNA also looks at a lower scenario, which would see demand come to only 87,000 MT by 2040, and an upper scenario, where demand would clock in at 184,300 MT by that time.
WNA data shows that currently about 440 reactors are operating across the world, with 60 under construction and an additional 110 planned. Most reactors in the construction or planning stages are in Asia, but experts agree that nuclear power is gaining traction globally and will become a larger piece of the energy pie. It’s also worth noting that multiple countries, including the UK, Belgium and Japan, are looking to extend the lives of existing reactors.
‘To us (nuclear energy) was always the answer,’ said Adam Rozencwajg, managing partner at Goehring & Rozencwajg. ‘And while everyone seems very pessimistic about everything, I think that perhaps we could be on the verge of a huge, major transformation where finally we do appreciate nuclear for the unbelievable technology that it is.’
Where will the uranium spot price go in 2024?
After 2023’s move past US$90, speculation is rife about where uranium prices could go in 2024. For many investors, the question is whether the commodity will continue to rise steadily or spike higher like it did in the last cycle.
Mart Wolbert, who goes by @YellowBull11 on X and is the founder of Contrarian Codex, said he’s always expected a price spike, but now he thinks it’s possible that uranium could make a parabolic move to the upside.
‘My expectation was always a robust price move to the upside, steady as she goes, to US$80, US$90, US$95 and then perhaps a blow-off top. Right now I think a parabolic price spike is the right way to look at this, and I think that has blown my base-case scenario — especially after (2023’s World Nuclear Association event) — out of the water,’ he said.
Wolbert noted that it’s financial entities like the Sprott Physical Uranium Trust (TSX:U.U) that could create a parabolic move. The trust currently holds 63,161,826 pounds of U3O8 and has a total net asset value of US$5.95 billion.
‘If (the Sprott trust sees) a lot more flows again like they did in 2021 and the start of 2022, they will be buying a lot more pounds, and they will be buying a lot more pounds in a physical market that is increasingly getting tighter,’ he noted, pointing to players like Yellow Cake (LSE:YCA) and PFYN Capital, which are also now looking to snap up uranium.
Justin Huhn, founder and publisher of Uranium Insider, made a similar comment, describing financial players as a ‘wild card.’ He also brought up small modular reactors (SMRs), which have about one-third the power-generation capacity as a traditional reactor. They’re expected to be a key source of demand in the future, although for now numbers are unclear.
Rozencwajg also sees SMRs a demand-side story to watch further into the future. ‘I think some of what these (SMR) companies are doing is really revolutionary, and will be critically important going forward. But none of them make the slightest bit of difference to supply and demand dynamics between now and 2030. What you have now is a China reactor buildout story, you have an India reactor hopeful plan and you have Saudi Arabia looking to build reactors as well. And that’s all you need — that’s what keeps this market really tight until the end of the decade,’ he noted.
Focusing back on prospects for 2024, Lobo Tiggre, editor and founder of IndependentSpeculator.com, chose uranium as his highest-conviction trade at the beginning of 2023, but has a more muted outlook this coming year.
As mentioned, uranium entered 2024 above US$90, trading at levels not seen since 2007.
How to invest in uranium in 2024?
Investors who believe in uranium’s upside potential have diverse options when it comes to getting exposure.
‘Right now you have to focus on real companies doing real things. Companies like NexGen Energy (TSX:NXE,NYSE:NXE) and Fission Uranium (TSX:FCU,OTCQX:FCUUF) that will be taken over. Companies like Boss Energy (ASX:BOE,OTCQX:BQSSF) that are in production and will enjoy much higher prices than their feasibility studies suggested they would enjoy,’ Rule said at the New Orleans Investment Conference in November.
But Temple also reminded investors not to discount the vehicles that are likely to attract generalist investors once their interest in the uranium sector has been piqued — those include the Global X Uranium ETF (ARCA:URA), the Sprott Uranium Miners ETF (ARCA:URNMM) and of course the Sprott Physical Uranium Trust.
It’s also possible to take a more speculative approach. As Resource Maven’s Preston pointed out, the universe of uranium stocks is small, and a rising price is likely to lift all boats. ‘If you want to go into the risky end, which is the explorers, you absolutely have the opportunity, the possibility of multiples of the gains that you might get on the producer side. But of course there’s the risk. The explorer will move with the market until or unless they either win at a discovery or fail,’ she said. ‘If they win you might get huge, huge returns — ridiculous returns — but there’s a big ‘if’ in that.’
Investor takeaway
After a stellar performance in 2023, many experts remain bullish on uranium in 2024. While opinions differ on its price trajectory and which stocks to focus on, the broad consensus is that opportunities for investors remain.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.