Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 554

Uranium and the fear of running out

The laws of supply and demand have an inevitability to them and recent moves in the uranium market are another reminder of their power. Back in September 2023, uranium was selling at around US$50 a pound. As we write, that price has moved to $US91/lb.1 In this article we look at the supply and demand dynamics underpinning that rise.

Bottomed out

For over a decade, the uranium market has been plagued by excess supply, low prices and negative sentiment around nuclear power. Between 2014 and mid 2021 for example, prices hovered around US$30/lb. For context, it last peaked at US$136/lb in 2007.

On the demand side a number of factors kept the main buyers – utility companies - from paying up for the radioactive metal.

  • High levels of global inventory and product availability.
  • The progressive retirement of Japan’s nuclear fleet post the Fukushima tsunami. Before 2011, nuclear accounted for 30% of Japan’s energy. By 2019 Japan’s nuclear energy output had fallen by 75%.
  • Anti-nuclear sentiment in Europe drove a nuclear phase-out in many countries (notably Germany).

Meanwhile, the supply of uranium was increasing, largely thanks to low-cost production from Kazakhstan. With plentiful supply and cratering demand, energy utilities were able to buy uranium at low ‘spot’ rates rather than contracting for long-term supply. The uranium price fell briefly below US$20/lb.

At sub US$30/lb, many uranium mines became uneconomic and were placed into ‘care and maintenance’.3 That led to a dramatic fall in mined production.

Something changed

In the early 2020s the supply/demand dynamic changed and the uranium price made two dramatic jumps, leaping from $US30/pound to $US50/pound in 2021 and $US50 to $US100/lb in 2023. What’s behind this shift?

  • The emergence of uranium ‘trusts’. These vehicles buy physical uranium, thus removing excess global uranium inventory from the system.
  • An improving demand outlook driven by a resurgence in nuclear power. China’s annual uranium demand is expected to nearly quadruple to over 40,000 tonnes per year by 2040.
  • Japanese reactor restarts, life extensions for ageing plants and development of new technologies (such as small modular reactors). These are all incrementally positive for uranium demand.
  • Sustained supply deficits, with long lead times to develop new supply.
  • The self-sanctioning of Russian material after its invasion of Ukraine put further strain on an already underprepared nuclear value chain.

Underpinning all these factors is the increasing realisation that nuclear power could be key to decarbonising energy. Nuclear provides reliable baseline power and, unlike fossil-fuel fired power plants, nuclear reactor lifecycle carbon dioxide emissions have a profile on par with renewables.

In essence, there’s been a huge supply/demand switch and for the first time in the history of the uranium market as we know it, we may see a sustained shortfall of available supply – and it’s beginning to be reflected in the price.


Source: Trading Economics

That’s why uranium is now a key portfolio theme for the Platinum Global Transition Fund2 (Quoted Managed Hedge Fund) (ASX:PGTX) - a fund specifically designed to provide capital growth over the long term by investing in undervalued companies that are seeking to financially benefit from the transition away from fossil-fuel derived energy and goods production and consumption i.e. the carbon transition.

In the midst of this major market shift, PGTX added four uranium stocks to the portfolio - Cameco and the Sprott Physical Uranium Trust (SPUT) from Canada, Kazakhstan’s Kazatomprom and Australian developer Paladin Energy.

These four stocks have very different – and somewhat complementary - characteristics.

  • The Sprott Physical Uranium Trust owns physical uranium and gives pure exposure to upside in the uranium price.
  • Cameco is a large, high-quality producer that provides exposure across the nuclear fuel cycle.
  • Kazatomprom is the largest upstream producer of uranium. It’s a dividend paying stock, valued at a discount to its peers.
  • Paladin Energy is a late-stage development company that provides exposure to near-term production and so favourable exposure to market pricing.

Buyers who look past the price

Whilst supply and demand fundamentals drive markets, buyer behaviour is also crucial. Indeed, understanding the behavioural element in markets is core to our investment philosophy.

Tellingly, the prospects for further strength in the uranium market are improved by the buyer behaviour of the big energy utilities. Constrained supply means these buyers can no longer look to source uranium in the spot market. They’re now looking for the supply certainty of long-term contracts.

Utilities are now genuinely concerned about lack of supply and that means they could start looking ‘past the price’.

For them, a US$20/lb move in the uranium price equates to a roughly $1 per megawatt-hour (MWh) increase in fuel cost for their reactor. That won’t change their behaviour given the importance of keeping the reactor running and especially in the context of the huge capital cost of their plants.

Given the depth of the current supply issues – and the fact it could take until 2030 or beyond for meaningful new supply to come on stream - these conditions could last for years. 

Today, we’ve got a market driven by price-inelastic buyers who are motivated almost solely by supply worries - literally by fear of running out. That could see very high prices sustained for a number of years. And that’s good news for companies in the uranium sector.

 

1 Source: Factset Commodities as at 08/03/2024
2 The Platinum Global Transition Fund invests in undervalued companies from around the world that are seeking to financially benefit from the transition away from fossil fuel-derived energy and goods production and consumption i.e. the carbon transition
3 When mines temporarily stop producing but the infrastructure and machinery is maintained and environmental risks managed.

 

Platinum Asset Management is a sponsor of Firstlinks. This information is commentary only (i.e. our general thoughts). It is not intended to be, nor should it be construed as, investment advice. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. Before making any investment decision you need to consider (with your financial adviser) your particular investment needs, objectives and circumstances.

For more articles and papers by Platinum click here.

 

RELATED ARTICLES

Ignore solar parity at your investing peril

The financial risks of fossil fuel investments

Aggressive climate targets spell opportunity for investors

banner

Most viewed in recent weeks

Why the $5.4 trillion wealth transfer is a generational tragedy

The intergenerational wealth transfer, largely driven by a housing boom, exacerbates economic inequality, stifles productivity, and impedes social mobility. Solutions lie in addressing the housing problem, not taxing wealth.

The 2025 Australian Federal election – implications for investors

With an election due by 17 May, we are effectively in campaign mode with the Government announcing numerous spending promises since January and the Coalition often matching them. Here's what the election means for investors.

Finding the best income-yielding assets

With fixed term deposit rates declining and bank hybrids being phased out, what are the best options for investors seeking income? This goes through the choices, and the opportunities and risks involved.

What history reveals about market corrections and crashes

The S&P 500's recent correction raises concerns about a bear market. History shows corrections are driven by high rates, unemployment, or global shocks, and that there's reason for optimism for nervous investors today. 

Howard Marks: the investing game has changed

The famed investor says the rapid switch from globalisation to trade wars is the biggest upheaval in the investing environment since World War Two. And a new world requires a different investment approach.

Welcome to Firstlinks Edition 605 with weekend update

Trump's tariffs and China's retaliatory strike have sent the Nasdaq into a bear market with the S&P 500 not far behind. What are the implications for the economy and markets, and what should investors do now? 

  • 3 April 2025

Latest Updates

Investment strategies

4 ways to take advantage of the market turmoil

Every crisis throws up opportunities. Here are ideas to capitalise on this one, including ‘overbalancing’ your portfolio in stocks, buying heavily discounted LICs, and cherry picking bombed out sectors like oil and gas.

Shares

Why the ASX needs dual-class shares

The ASX is exploring the introduction of dual class share structures for listed companies. Opposition is building to the plan but the ASX should ignore the naysayers and bring Australia into line with its global peers.

The state of women's wealth in Australia

New research shows the average Australian woman has $428,000 in net wealth, 40% less than the average man. This takes a deep dive into what the gender wealth gap looks like across different life stages.

Investing

The two most dangerous words in investing

Market extremes are where the biggest investment risks and opportunities lie. While events like this are usually only obvious in hindsight, learning to watch out for these two words can alert you to them in real time.

Shares

Investing in the backbone of the digital age

Semiconductors are used to make microchips and are essential to a vast range of technology and devices. This looks at what’s driving demand for chips, how the industry is evolving, and favoured stocks to play the theme.

Gold

Why gold’s record highs in 2025 differ from prior peaks

Gold prices hit new recent highs, driven by a stronger euro, tariff concerns, and steady ETF buying – all while the precious metal’s fundamental backdrop remains solid amid a shifting global economic landscape.

Now might be the best time to switch out of bank hybrids

In this interview, Schroders' Helen Mason discusses investing in corporate and financial credit securities, market impacts of tariffs, opportunities for cash investments, and views on tier two and hybrid bonds.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.