Uranium prices have soared to a nearly 15-year high following a warning from the world’s largest producer, Kazakhstan’s Kazatomprom (LON: KAP), that it is likely to fall short of its production targets over the next two years.
Kazatomprom pointed to critical factors like sulfuric acid shortages and construction delays at newly developed deposits as the primary culprits behind the ongoing production challenges. These challenges, it cautioned, could persist until 2025. A comprehensive assessment of the potential impact on output is scheduled for release in a trading update by February 1.
“Despite the ongoing active search for alternative sources of sulfuric acid supply, current forecasts indicate that the company may find it difficult to achieve 90% production levels compared to subsoil use contract levels,” Kazatomprom stated.
Sulfuric acid is a favoured method for uranium extraction from raw ore due to its cost-efficiency and effectiveness with various ore types.
The miner also raised concerns about its guidance for the upcoming year, highlighting that continued supply disruptions throughout 2024 and potential non-compliance with scheduled construction projects could further impact its performance.
The spot price of uranium, a radioactive metal, has more than doubled in 2023 and currently stands at $97.45 per pound. While this marks a significant increase, it remains below the triple-digit figures observed in 2007 and the subsequent downturn after the 2011 Fukushima disaster in Japan.
This surge in uranium prices coincides with the commitment of 24 nations, including the United States, Japan, Canada, Britain, and France, made last month during the 28th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP28) in Dubai. These countries pledged to triple nuclear power capacity by 2050 as part of their efforts to combat climate change.
China, although not part of the COP28 pledge, is a key player in global nuclear plant construction. It aims to nearly double its capacity to 100 gigawatts by the end of this decade, with 22 out of the 58 plants under construction worldwide located in the Asian nation.
Recent legislation in the United States could also exert pressure on uranium prices sooner than expected. In an effort to reduce dependence on Russian uranium, which supplies over 20% of its uranium, Congress passed a bill in December mandating the sourcing of a portion of nuclear fuel domestically. The bill stipulates that by the end of 2027, the US must obtain 20 tonnes of High-Assay Low Enriched Uranium (HALEU) fuel, crucial for running advanced reactors in the country, from domestic sources. The bill now awaits President Joe Biden’s approval.
Bank of America and Berenberg Bank have both released separate research notes this week, suggesting that the ongoing tightness in the uranium market could propel prices past the $100 mark in the coming days.
