Why Are Uranium Prices Rising Despite COVID-19?

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Prices of Radioactive Metals Spike Through COVID-19 Pandemic

Uranium is a radioactive metal mined in countries like Kazakhstan, Namibia, Canada, and Australia. It is mainly used for domestic nuclear power generation, to power nuclear submarines, and for nuclear weapons. In total, nuclear power plants operate in 31 countries, with France, Ukraine, Hungary, and Slovakia relying on these plants as their main source of energy. The United States is the largest nuclear electricity producer in the world. While some countries, such as Switzerland, Belgium, and Germany, are planning to phase out nuclear power, others like the United States and China intend to increase its use. Although these factors have contributed in part to fluctuations in the uranium market, there has been an unusually high surge recently in uranium prices.

production of enriched uranium. Uranium ore found in nature. Yellow and radioactive stone. Risk of radiation.

Why Uranium Prices Are Making a U-Turn

After a prolonged fall of more than 70% over the past five years with major price crashes, uranium prices surged between mid-March and early-April 2020 from $24 to $29 a pound. Considering the significantly reduced demand in most industries due to the COVID-19 (Coronavirus) pandemic, this sudden spike was quite unexpected, though the underlying reasons are quite understandable. These include:

  • The Diminishing Impact of Fukushima – After a tsunami in Fukushima in 2011 caused an unprecedented nuclear disaster, the Japanese nuclear plant was shut and began selling stockpiles of uranium for drastically reduced prices. In late 2016, prices dropped to as low as under $18 per pound. As mines have suspended operations or cut production, a shortage of supplies is anticipated in the near future, which has resulted in a massive increase in prices.
  • A Shortage in Supply – Fears related to Covid-19 have caused widespread closures of mining operations. Countries including Kazakhstan and Namibia have drastically reduced production because of government-mandated restrictions due to the pandemic, causing massive shortages. Kazatomprom, the largest uranium production company in the world, has projected a 16% drop in production due to restrictions. This will likely result in a decrease of some 8% in international supply. In addition, the market dropped by millions of pounds per annum after the largest uranium mine in the world, the Canadian Cigar Lake, shut its doors.
  • A Revival in the US Domestic Market – US President Donald Trump announced a significant increase in the budget for local uranium production companies for the next decade. Around $15 billion has been allocated with the aim of not only assisting the domestic market in the production of uranium required for nuclear power generation, but also to reduce the country’s dependence on imports, which currently stands at over 90% of America’s total consumption.

Will the Upturn Continue?

After mines around the world are reopened or return to full capacity, there may be yet another boost in the uranium market or, conversely, stockpiles of uranium may actually flood the market. From a different angle, geopolitical collaboration could help to keep prices level as industry leaders flood markets with cheap uranium to drive away competitors. It is highly likely, though, that in these times of unprecedented uncertainty, most sectors in the market, including mining, will continue to experience severe and unexpected volatility.

 

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