Russia's Uranium Cash Cow Under Threat Despite Price Surge - Newsweek
Russia's Uranium Cash Cow Under Threat Despite Price Surge - Newsweek
Prices for uranium are soaring amid a push by governments to meet climate goals while new U.S. sanctions on major producer Russia could spur North America to produce more of the vital fuel for nuclear power stations.
The Biden administration has put Russia's uranium on its expanding sanctions list for Russian President Vladimir Putin's invasion of Ukraine on February 24, 2022, raising the stakes for the U.S. to fill the gap following decades of decline in domestic production of the commodity.
Leigh Curyer, CEO of NexGen Energy, a Canadian company mining in Saskatchewan, said the U.S. must lose its dependence on Russia for the mineral.
"For the U.S. to truly transition from Russian uranium, it must have access to secure, allied sources within and beyond the U.S.," he told Newsweek.
Rising prices
The spot price for a pound of uranium on Thursday was $85.70, which while below the $106 it reached in January, is still nearly three times higher than the $30 a pound it fetched in January 2021.
Over the past five years, uranium prices have increased by 233 percent, more than twice the gains in silver (99 percent) and more than three times the gains in gold (75 percent) according to Bloomberg price data on May 31.
"The demand is totally inelastic," said John Ciampaglia, CEO of Sprott Asset Management, which manages the Sprott Physical Uranium Trust, the world's largest physical uranium fund.
"If you're running a nuclear power station, there's pretty much no price you wouldn't pay to ensure you've got fuel because you're not going to turn off a $10 billion machine," he told Newsweek.
Ciampaglia compares the current uranium cycle to the energy crisis in the 1970s, when Western governments decided they did not want to be at the mercy of OPEC and were spurred to build most of the nuclear power stations now operating.
He believes the current uranium price is good for an investor in a company trying to restart a previously existing operation.
"It's not in our opinion a sufficient price to incentivize new greenfield production," he said. "We think the prices of uranium need to get more in the $120 to $150 handle to really incentivize this."
He noted how in the last two uranium bull markets in the 1970s and 2000s, prices adjusted for inflation reached about $170 for the former and $200 for the latter, according to a Bank of America assessment last year.
"So we do have precedents where the price of uranium could clearly double from today and we wouldn't be surprised if that were to happen," Ciampaglia said.
About 150 million pounds of uranium will be produced this year, but the world's 440 or so reactors currently operating need roughly 180 million pounds annually—a demand that will grow even more as more reactors are built in India and China and existing reactors get life extensions of up to 20 years.
"The market price is starting to move in anticipation of this future demand and it's obviously sending the right signals to the industry that it needs to produce more," Ciampaglia said.
Where will it come from?
The U.S. needs 50 million pounds of uranium a year but in Q1 2024, produced only 82,533 pounds from mines in Wyoming, Texas and Nebraska, showing its dependence on foreign sources.
Russia provided 12 percent of uranium entering the U.S. in 2022, according to the U.S. Energy Information Administration (EIA) with other supplies coming from Canada, as well as Kazakhstan through its national operator Kazatomprom.
Following the Fukushima nuclear accident in Japan in 2011, many countries turned their backs on nuclear power for a decade, causing a collapse in uranium prices that made it economically unviable to mine.
"The only way to work your way out of that legacy situation is you need to have higher prices to incentivize the building of new mines," Ciampaglia said.
One of those incentivized is NexGen Energy, which is in the final stages of federal permitting approval for the Rook I Project in Saskatchewan's uranium rich Athabasca Basin and aims to eventually provide nearly one-quarter of the world's nuclear fuel.
"Without new projects, resuscitating existing mines alone won't be able to keep up with demand, and Russian uranium will be back on the table," NexGen Energy's Curyer said. "Greenfield projects like ours need to be prioritized and advanced, and we need to reopen existing mines that aren't yet entirely depleted."
The World Nuclear Association has estimated that by 2040 the world will need twice the uranium currently produced. Curyer said that the Rook I project will help shrink the gap between supply and demand "but multiple projects the size of Rook I will be required to close the deficit."
The Russia factor
The Prohibiting Russian Uranium Imports Act that U.S. President Joe Biden signed into law has waivers until 2028 while the domestic industry is rebuilt. It allows utilities to import from Russia if there are no viable alternative sources or if it is in the national interest. Many U.S. utilities are so reliant on Russia's enriched uranium that they fear an outright ban could lead to power plant shutdowns, Reuters reported this month.
"American nuclear power plant owners feasted on cheap Russian enriched uranium for decades, as our mines closed and we lost the ability to enrich our own fuel," said Mark Nelson, a nuclear energy expert from Radiant Energy Group. "Companies over here need to know they can safely invest in rebuilding America's own supply chain.
"Long-term contracts with Russia are unlikely to ever be re-upped, so the question is what happens to the existing contracts. The Biden administration's rules say that you can get a waiver if you really have to have that Russian product [but the Russians] are engaging in this game of chicken and saying 'we demand you apply for that waiver now if you think you're going to need us in the future.' At the same time, nobody wants to be the one to break off contracts."
Along with the bipartisan legislation is the Biden administration's provision of $2.7 billion of U.S. government aid to stimulate investments in the domestic nuclear fuel cycle, including in uranium production, conversion and enrichment facilities.
This has been welcomed by Urenco, a British-German-Dutch nuclear fuel consortium that enriches natural uranium, including in the U.S. A Urenco spokesperson told Newsweek in a statement that since Putin's invasion of Ukraine, it responded to increased demand for non-Russian fuel "by announcing additional investments to add new centrifuge cascades at its existing plant in New Mexico."
However, the big challenge for the U.S. is that only three nuclear reactors have been completed there in the last 30 years.
"A lot of those supply chains, those workers, the knowledge, are gone," Ciampaglia said.
Meanwhile, China is expected to overtake the U.S. in number of nuclear power stations by 2030 and has backed its investments in the infrastructure by stockpiling uranium to ensure a steady fuel supply from its ally Russia and its neighbor Kazakhstan.
Because nuclear plants use relatively little fuel, countries of hundreds of millions of people can get power from only a few million pounds of uranium, making it essential to meet net zero carbon emissions targets, but the long-term supply of the mineral is tinged with uncertainty.
"Prospecting for uranium is moderately hard," Nelson said. "Putting mines into production is extremely hard."
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About the writer
Brendan Cole is a Newsweek Senior News Reporter based in London, UK. His focus is Russia and Ukraine, in particular the war started by Moscow. He also covers other areas of geopolitics including China.
Brendan joined Newsweek in 2018 from the International Business Times and well as English, knows Russian and French.
You can get in touch with Brendan by emailing b.cole@newsweek.com or follow on him on his X account @brendanmarkcole.
Brendan Cole is a Newsweek Senior News Reporter based in London, UK. His focus is Russia and Ukraine, in particular ... Click here.