When Will Uranium Prices Go Up? (Updated 2023)

How have uranium prices traded historically?

As briefly outlined above, uranium has experienced a wide price range this past century — while its highest level was nearly US$140, the lowest U3O8 spot price came in at just US$7.

In 2003, the price of uranium began an upward trend as demand for nuclear power rose alongside the world's need for energy, especially in growth economies such as China and India. These increasing energy demands came at the same time as significant supply-side disruptions. For example, in 2006, Cameco's massive Cigar Lake mine in Saskatchewan flooded, stalling production for several years at one of the largest undeveloped uranium deposits in the world.

The inability to move this uranium ore to market was a huge setback for the uranium industry, and translated into explosive price growth for the metal in 2007. However, those impressive gains were soon undone by the 2008 economic crisis, which sent uranium on a downward spiral, slipping below the key US$50 level in early 2009. In 2010, it slipped into the US$40 range.

What factors impact uranium supply and demand?

Uranium prices are mainly influenced by aboveground mine supply and demand for nuclear energy. To understand where those stand, investors in this sector typically look to:

• output from uranium mines
• the number of nuclear reactors online, under construction or planned
• the signing of long-term contracts between uranium suppliers and utilities companies

Analysts with a bullish lean believe the uranium market cycle has reached its bottom and that a break to the upside for uranium prices is supported by positive supply and demand fundamentals.

On the demand side, nuclear energy generated from 440 reactors around the globe supplies about 10 percent of the world's energy requirements. China alone is constructing 21 new reactors at the moment, while Russia is constructing three with another 11 planned and India has eight nuclear reactors under construction.

A World Nuclear Association (WNA) report forecasts 2.6 percent annual growth in nuclear generation capacity over the next two decades for a total of 615 gigawatts electrical in 2040. About 79,400 tonnes of uranium will be required to feed these reactors in 2030, up from 62,500 tonnes in 2021. This figure is expected to grow to 112,300 tonnes of uranium in 2040.

On the supply side, major uranium producers are still not producing at full capacity, while new uranium exploration and development projects are few and far between. Highlighting these circumstances, the WNA points out that world uranium production dropped from 63,207 tonnes of uranium in 2016 to 47,731 tonnes of uranium in 2020. The organization also notes that “only 74 (percent) of 2020's reactor requirements were covered by primary uranium supply.”

Huge cuts to global uranium production have come from Kazakhstan, the world's largest uranium-producing country. Responsible for 41 percent of global uranium production, the Central Asian nation began reducing its annual production levels in 2018 and plans to continue "flexing down" its uranium output through 2022.

Australia, Namibia, Canada and Uzbekistan are also among the world's biggest uranium producers. In Canada, Cameco shuttered the Saskatchewan-based McArthur River mine in 2018 and temporarily closed Cigar Lake — the world's top uranium mine — in response to the COVID-19 pandemic.

There are some signs of an uptick in uranium production since 2020, with the WNA reporting that 2021 global uranium output increased by 601 tonnes to cover 77 percent of reactor requirements for the year. In mid-2022, Kazatomprom announced would be increasing its uranium output throughout 2023 and 2024 based on expected demand levels. Additionally, Cameco brought the McArthur River/Key Lake operation back on line in November 2022. The company plans to produce 15 million pounds of uranium per year from these operations by 2024, which is 40 percent below their annual licensed capacity.

Despite these positive signs, supply deficits are likely to continue in the years ahead. "Uranium production volumes at existing mines are projected to remain fairly stable until the late 2020s, then decreasing by more than half from 2030 to 2040," the WNA report states. This is also due in part to the lack of uranium exploration in recent years. The organization’s research shows that uranium exploration spending fell by 77 percent from 2014 to 2018, dropping to US$483 million.

When will uranium prices go up?

So when can investors expect to see uranium prices go up? And when will the spot price for the metal once again move above — and stay above — the key US$50 to US$60 level?

In January 2020, Rick Rule, who was then part of Sprott (TSX:SII,NYSE:SII), told INN that investors interested in uranium should be prepared to take the long position — in his opinion, it could be a while before we see a rebound in the uranium market. Rule reiterated his stance in a July 2021 interview with INN, pointing to Japanese restarts as the last catalyst needed to launch a new era of strength in the uranium market. “Everything else is in place,” he said at the time.

There's been progress on that front since then. Japanese Prime Minister Fumio Kishida announced in August 2022 that the nation is moving to restart its idled nuclear plants; it is also developing next-generation reactors as part of the government’s "green transformation." Japan is aiming for nuclear power to account for 20 to 22 percent of its energy mix by 2035, and the first phase in reaching this goal is the planned restart of at least seven additional reactors by mid-2023.

A true renaissance for uranium might be a few years off or just around the corner. Either way, market participants are likely to see a series of incremental price increases along the way, and probably some volatility. Ciampaglia told INN: “The uranium market is not a very big market compared to, say, the oil and gas market and other commodity markets. It doesn't take a lot of capital to come from the generalist pool of capital to make a ripple in the uranium market."

A good gauge for where the winds are blowing is utilities contracts, as these entities are traditionally the greatest sources of uranium demand. In fact, only about 10 to 15 percent of uranium trades happen on the spot market — the vast majority of uranium is sold through large long-term contracts between producers and utilities.

It's also useful to watch the rest of the nuclear fuel cycle. Speaking to INN in September 2022, Ciampaglia pointed out that Russia controls 25 percent of global conversion capacity and almost 40 percent of enrichment capacity — this dominance amid the country's war with Ukraine has spiked prices for these services. "We think eventually what's happening to the prices of conversion and enrichment is going to kind of move backwards into the chain and ultimately lift the price of U3O8," he said.

UxC estimates that by 2030 about two-thirds of utility nuclear fuel requirements will not be covered by contracts, and this will reach 81 percent in 2035. The lack of new uranium projects coming online is a considerable part of this equation. As utilities' inventories decline, they will be willing to accept higher contract prices to replenish their energy fuel stock. Much higher long-term contract prices will in turn bring uranium spot prices along for the ride.

In terms of exactly how high uranium prices could get in the future, there are a wide range of views.

Ben Finegold of Ocean Wall told INN in an October 2022 interview that his firm believes the uranium spot price could reach US$75 in 2023. His bullish outlook includes the potential for term market pricing reaching US$90 to US$100. "(Inflationary pressures have) really resulted in almost a twofold increase in the breakeven price for western miners — we've seen breakeven levels as high as US$90," he said. "So the price needs to in essence double in order to bring this back online."

In August 2022, the Bank of America (NYSE:BAC) set its uranium spot price target for 2023 at US$70. As of late January 2023, analysts at Trading Economics were forecasting that uranium would trade at US$53.01 in 12 months time.