Uranium’s Turning Point?

Yellowcake – a commodity that is loved and loathed all in the same breath. The questions we have been asking are – which is right and what’s the outlook? Because as traders and investors that dilemma is key, there is a gap here and that leads to volatility and incorrect pricing in the short and long term some may want to jump on.

Recent developments in the uranium market suggest we may be witnessing the beginning of a significant shift. After a prolonged period of downward pressure on prices, two key events over the past two weeks have kicked yellowcake back into the minds of traders. First is the geopolitical supply shock, the second are signals of increased long-term demand. That is music to us in economics as this is a pure supply and demand thematic and suggests a potential reversal. Together, they could usher in a new phase of steady price appreciation, reminiscent of the market’s bullish run in 2023.

Point 1: Demand Side: U.S. Energy Policy Could Lay the Foundation for Long-Term Growth

The first major factor influencing uranium demand stems from the U.S. political landscape. The election of President-elect Donald Trump introduces a new energy agenda, one that could reshape the trajectory of nuclear power in the United States. While Trump’s campaign rhetoric and early post-election messaging have heavily emphasised fossil fuel expansion – check last week’s piece on the “drill, baby, drill” thematic – it’s clear that nuclear power also holds a significant place in his vision for America’s energy future.

Trump has repeatedly voiced support for nuclear energy, particularly for small modular reactors (SMRs). These advanced nuclear technologies are seen as the next generation of clean energy solutions, offering modular, scalable power generation with enhanced safety and efficiency. In recent speeches and interviews, Trump has highlighted (in his view) nuclear energy is part of the solution needed in achieving sustainability, lower carbon emissions, and enhancing U.S. energy independence. That last point is actually his biggest driver here being an America First ideal.

This policy focus could mark a critical inflection point for uranium demand globally. While nuclear infrastructure projects are long-term endeavours and won’t generate immediate demand for uranium, the signals are clear: the U.S. government may soon prioritise nuclear energy investments in ways we haven’t seen in decades. It also comes at a time when the likes of France and to some extent greater Europe moves in this direction.

Either way as these plans materialise, uranium’s importance as a strategic resource will only grow.

Moreover, Asia is also shifting its focus to this energy source as well. Asian countries are increasing their reliance on nuclear energy to meet ambitious carbon neutrality targets. This international momentum could compound the effects of U.S. policy changes, creating a robust foundation for sustained uranium demand over the next decade.

Point 2 Supply Side:

Part 1 Russia’s Export Restrictions Tighten the Market

The second major development is far more immediate and impactful. That changes on the supply side of the equation. 

Last week, Russia announced new restrictions on the export of enriched uranium to the United States, escalating geopolitical tensions and significantly disrupting global supply chains.

This move mirrors the U.S.’s earlier ban on Russian uranium imports, imposed in May 2023 as part of broader sanctions against Russia. Historically, Russia has been a critical player in the global uranium market, supplying enriched uranium to numerous countries, including the United States. In 2023 alone, Russia accounted for 28 per cent of U.S. enriched uranium imports, a substantial share of the market.

Although U.S. sanctions effectively ended these imports by August 2023, waivers remain in place for select companies, allowing limited purchases from Russian suppliers until 2028 such as Centrus Energy and Constellation Energy. What isn’t clear is whether any imports have actually taken place under this exemption since the sanctions were tightened.

Either way Russia’s new export restrictions will exacerbate existing supply chain constraints and are likely to push U.S. utilities to seek alternative sources of enriched uranium. 

This, in turn, should drive increased activity in both spot and futures markets as energy providers scramble to secure long-term supply agreements. The ripple effects of these restrictions may also spill over into global markets, further tightening the balance of supply and demand.

Part 2 Wider Supply Challenges: A Tighter Market Ahead

The second part of the supply side equation is that Russia isn’t the only player and recent production reports, and other geopolitical issues are also driving shortages in uranium

For example: 

1. Niger’s Production Halt: Orano, a major uranium producer, recently placed Niger’s only operational mine into “care and maintenance” code for moth balling due to logistical challenges. The catch with putting mines into care and maintenance is that once its down it takes months (sometimes years) to return to full capacity. So it’s not just a here and now story. Be aware this mine, which has an annual capacity of 2,000 tonnes of uranium (tU), accounts for approximately 3 per cent of global supply. The halt underscores the fragility of the uranium supply chain in politically unstable regions.
2. Junior Miners Struggling: Smaller uranium miners are cutting their production targets for 2024 and 2025 due to a combination of slower-than-expected ramp-ups, lower ore grades, and resistance from local communities. Collectively, these issues have removed an estimated 2,600 tU from projected global supply—roughly 4 per cent of the market.
3. Offsetting Gains Insufficient: While Cameco has announced a 1-million-pound (365 tU) increase in its 2024 production guidance thanks to improved performance at its McArthur River mine, these gains are insufficient to offset broader supply losses. 

With supply tightening, producers struggling to meet commitments in the spot market, the pressure is building on the supply that is in circulation – and that is a price enhancer.

Where does this leave Uranium?

These developments create a powerful pinch point in the uranium market. There is a promising long-term demand story evolving driven by potential shifts in U.S. energy policy and global momentum toward nuclear energy. 

On the flip-side, immediate supply constraints, driven by geopolitical tensions and production challenges, are tightening the market.

The convergence of these factors could mark the start of a new cycle characterised by sustained price increases. While it’s too early to definitively declare a bull market, the conditions are becoming increasingly favourable.

For investors, this shifting landscape presents an opportunity. If supply disruptions persist, the uranium market could experience a strong rebound in the coming months. Prices in both the spot and term markets are likely to reflect this tightening balance, creating a more attractive risk-reward dynamic for those positioned to take advantage of the trend.

Big caveat – the uranium market is notoriously volatile and can see +/- 20 per cent moves in days or weeks. But the current setup suggests a potential turning point that could define the market’s trajectory for years to come.