14 Nov 2022
Uranium powers nuclear reactors, which generate about 10% of the world's electricity
Uranium (chemical symbol U) is a naturally occurring, silvery-white metallic chemical element that is used to power nuclear reactors to create electricity (1). A uranium atom has 92 protons and 92 electrons, giving it the highest atomic weight of all naturally occurring elements.
Discovered in 1789 by German chemist Martin Klaproth in the mineral pitchblende, uranium was initially used as a colorant for ceramic glazes and for tinting in early photography (2). Its radioactive properties were not recognized until 1896, and its potential for use as an energy source was not manifested until the mid-20th century.
French physicist Antoine H. Becquerel discovered Uranium’s radioactive properties 1896 (3). This was the first instance that radioactivity had been studied, opening a new field of science. Marie Curie coined the term radioactivity shortly after Becquerel’s discovery, and with Pierre Curie, continued the research to discover other radioactive elements, such as polonium and radium, and their properties.
Uranium is used to power commercial nuclear reactors at about 440 nuclear power stations that produce electricity around the world (4). About 10% of the world’s electricity is generated from uranium in nuclear reactors. This amounts to over 2500 terawatts each year, as much as from all sources of electricity worldwide in 1960. There were 93 operating nuclear reactors and 55 nuclear power plants in the United States as of 2021, representing 20% of the electricity supply (5).
Uranium ore is extracted from the earth using one of several mining techniques (included open mines and underground mines). The uranium ore is then either crushed or chemicals area applied to extract the uranium from the uranium ore and create uranium concentrate. Concentrated uranium, called “yellowcake” is then concerted into a gas, uranium hexafluoride (6). The gas is then enriched and converted into nuclear fuel which is then used to make nuclear fuel rods.
Kazakhstan produces by far the most uranium in the world, providing 45% of the world’s supply in 2021. Other producers in include Australia, China, Uzbekistan and Namibia (7). Australia currently has the largest known uranium resources – accounting for about one third of all known uranium on Earth (8).
To many, nuclear power is part of the answer in the transition away from fossil fuels. That’s why uranium was resurgent in 2021, rising by more than 30% to a level not seen since 2012. And in March 2022, uranium prices surged to their highest level since the nuclear disaster in Japan’s Fukushima plant in 2011 (9).
However, it is worth remembering that uranium is not traded on a formal exchange like many other commodities, but rather buyers and sellers negotiate privately. The New York Mercantile Exchange (NYMEX) recently began offering a uranium futures contract.
In looking at the fundamentals, the World Nuclear Association released The Nuclear Fuel Report: Global Scenarios for Demand and Supply Availability 2021–2040 in September 2021. The report forecast uranium demand from the world’s nuclear reactors was expected to rise to 79,400 metric tons of elemental uranium in 2030 and 112,300 tons in 2040. In 2021, global uranium demand from nuclear reactors was estimated at 62,500 tons (10).
On the supply side, however, global uranium production plunged to 47,731 tons in 2020 from 63,207 metric tons in 2016 due to a prolonged price depression – thanks to Fukushima – which discouraged exploration activities. Additionally, the Covid-19 pandemic in 2020 also restricted uranium production.
The global supply/demand picture points to even higher prices ahead. For example, the past several years of minimal contracting leaves utilities with significant uncovered fuel requirements beginning in 2023. Since it takes up to two years to transform uranium ore into fuel pellets, utilities should spend 2022 aggressively seeking to secure their uncovered fuel requirements for 2023 and beyond.
There is also the investment side to the uranium story. An exchange traded fund (launched in July 2021) that invests in physical uranium began stockpiling so much of the metal that there were fears it could corner the market and choke off supplies to power stations (11).
Nuclear power has been accepted by many as a necessary element of the global decarbonization process and an important part of the global energy mix for the foreseeable future. As the critical component to nuclear power, uranium is a valuable commodity. You can participate in this market either through purchasing uranium mining stocks or funds with exposure to uranium and nuclear power. Funds with exposure to uranium may hold either uranium miners or physical uranium.
If you are interested in adding uranium exposure to your portfolio, try searching:
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