Uranium is (still) just about the world’s most hated commodity.
From a peak of almost $140 per pound in June 2007, the price is now about $28 per pound. That’s a drop of around 80%.
I say ‘still’ hated because last April, uranium was languishing around $20/pound.
Since then, supply cutbacks have started a rally.
Long term, though, the real driver of the price will be demand – whose main determinant is the nuclear energy industry, where uranium is the key fuel.
Nuclear power has been out of favour since the Japan’s Fukushima disaster in 2011.
But now the world is finally waking up to nuclear’s virtues…
The climate is changing
Climate change is one of the biggest issues facing mankind’s future.
I don’t want to get involved today with all the reasons. But most people agree on one aspect – burning fossil fuels is bad for the environment.
Yet right now, the world needs the energy that carbon produces.
Sure, it’d be great if renewables – wind, solar or hydro – were to supply all our electricity needs. But that’s not going to happen for the foreseeable future.
Renewables are projected to supply 31% of world electricity generation in 2040, the same percentage as coal, according to the US Energy Information Administration.
Granted, forecasts can be wide of the mark. But fossil fuels won’t be fading away yet.
Meanwhile, over the last few days – coinciding with increased electioneering ahead of next year’s US presidential election – there’s been a lot of talk about America’s Green New Deal.
This term was first used by Pulitzer Prize-winner Thomas Friedman in January 2007 after America had just enjoyed its hottest-ever year (there have been five warmer ones since then).
Fast forward to 2019 and the Green New Deal has become a major focus of US policy debates. That’s due mainly to Alexandria Ocasio-Cortez (known as AOC), the youngest woman to be elected to the US House of Representatives and one of the favourites to run for president next year, pushing the idea hard.
The Green New Deal’s main aim is to lower US greenhouse gas emissions to net-zero and meet 100% of America’s power demand from clean, renewable, and zero-emission energy sources by 2030.
I won’t bore you with all the details here (also you may not agree with many of them). The Green New Deal resolution doesn’t say how the US government, with $22 trillion of debt, would pay for it (funny how many left-leaning politicians avoid such details). And it may never become law.
To be clear, the Green New Deal doesn’t back nuclear power. It’s officially against it.
But here’s the thing. Nuclear energy is a genuinely carbon-free electricity source.
“Even as many plants close prematurely, there are hints of a turnaround in nuclear energy’s future”, writes James Meigs in City Journal. “The dominant anti-nuclear narrative among environmentalists—and on the left, in general—is being challenged from within. In recent years, some eco-pragmatists and climate scientists have begun touting the advantages of zero-carbon nuclear energy and poking holes in overblown hopes for renewables”.
Most leading environmental groups also continue to oppose nuclear power. But as climate change concerns increase, some are re-thinking. In late-2018 the previously anti-nuclear Union of Concerned Scientists supported policies to keep US plants open. Other ‘pro-nuclear Greens’ are now reaching the same conclusion.
On the other side of the spectrum, last September President Trump signed off a bill intended to boost public-private partnerships in nuclear research. And US Secretary of Energy Rick Perry has floated two “ambitious” proposals to help keep both nuclear and coal plants in business. The reason: America’s national security.
The problem is that subsidies for wind and solar electricity generation (as well as low natural gas prices) are making life very tough for US nuclear plant operators.
But this “threatens to leave the power grid largely dependent on natural gas during lulls in wind or solar power output”, says Meigs. “Gas-fired power plants rely on a steady flow of natural gas through a relatively small number of interstate pipelines. These pipelines are vulnerable to hacking and breakdowns. If [these] managed to knock out several pipelines at once, entire regions of the country could fall into crisis.
Back up supplies
Nuclear power stations, in contrast, can store fuel onsite, making them excellent emergency back-up power sources when renewables aren’t working well enough.
“Nuclear fuel is so cheap, it makes sense to keep plants running once you start them up”, says Bloomberg New Energy Finance analyst William Nelson.
Indeed, “nuclear power is finding new pockets of support around the world, sometimes from environmentalists and political leaders who once opposed it”, notes Meigs. In France, “President Macron is outspoken in rejecting pressure to shut plants. Even in Germany, home to the most vociferous anti-nuclear activists in Europe, a coalition of environmental groups calling themselves ‘atomic humanists’ held an October ‘Nuclear Pride Fest’ in Munich.”
No wonder. Though it gets 38% of its electricity from renewables after closing its nuclear plants, Germany still needs coal for about 40% of its energy, making it the “biggest fraud globally”, according to one EU official.
“We need a massive nuclear energy programme”, says Andrew Sullivan in Intelligencer. “We can keep innovating/investing in renewables and use as much as we can. But they are not going to save us or the planet in time. We know nuclear works and does so quickly.”
In truth, that’s unlikely to happen. But even a change in sentiment towards nuclear power promises to be bullish for uranium.
Here’s geologist Mickey Fulp on the future of the market: “I can’t tell you when, but there will be a uranium shortage”, he says. “There’ll be great demand, the price will go up, and stocks are very dependent on the spot price”.
Another boost could come from the US April decision on the Section 232 petition. This would insist on national security grounds that 25% of the uranium used by American utilities should be domestically mined (the US could make Canada a ‘friendly/ally exemption’). Watch this space.