A positive outlook for the nuclear sector is reflected in strong market fundamentals. There’s nothing more fundamental than fuel supply.
Many a ‘nuclear renaissance’ has fizzled out over the years but the optimism that surrounds the nuclear industry currently is clearly substantial – if the evidence of the uranium market is anything to go by. Cameco recently reported its results for the second quarter, noting an improved gross profit on the back of what it terms ‘significant momentum’ in the nuclear energy industry. Cameco added that the heightened supply risk caused by geopolitical developments are translating into increased opportunities. In a statement the company said: “All over the world, government policies and corporate decisions are being followed up with proposals, commitments, and actions to support the nuclear fuel cycle and re-energize nuclear power as a fundamental source of clean, secure and low-cost energy. We are seeing improving market fundamentals with prices for uranium rising, and UF6 conversion prices hitting new record-highs.” Gross profit improved due to higher average prices and increases in the uranium spot price relative to a year ago, Cameco reported. Average realized prices were 11% higher than in the same period last year.
Adding to this, for 2023 the company increased its revenue outlook, which it says is primarily driven by higher than expected average prices and increased deliveries of uranium. As Tim Gitzel, Cameco’s president and CEO, noted: “The improving fundamentals are creating increased interest from the investment community. In addition to seeing interest from our traditional resource investors, Cameco is seeing interest from energy investors, clean energy investors, infrastructure investors and generalists.”
Reporting its half-year results, French nuclear fuel company Orano also noted expectations of an improved outlook for 2023 in what it reports is a healthy market. Revenue was up 5.9% on a like-for-like basis, they say.
Like Cameco, they forecast an improved financial outlook for 2023 in what they describe as a ‘buoyant market’. Revenue growth of more than 10% is anticipated compared to 2022.
Adding to the sense of building momentum, in July, another major uranium supply company, Urenco, approved an investment to expand enrichment capacity at its US site in New Mexico. The project will see multiple new centrifuge cascades added to an existing plant as part of Urenco’s capacity programme, which it says is designed to strengthen the nuclear fuel supply chain.
The combination of the climate crisis and energy security concerns in the light of the ‘changed geopolitical situation’ is resulting in a greater demand for nuclear energy and Urenco’s enrichment services, the company said in a statement, noting new commitments from US customers for non-Russian fuel. The expansion will provide an additional capacity of around 700 tonnes of SWU per year, a 15% increase at the US facility when the first new cascades come online in 2025.
Uranium supply giant Kazatomprom also issued its second quarter trading update, noting that average realized price for the first half of 2023 was higher compared to the same period in 2022 due to higher uranium spot price. Kazatomprom says it maintains the current level of expectations for annual production for 2023 although U3O8 production volume was up 7% year-on-year for the quarter.
More recently, political instability in Niger has also prompted a price increase in uranium. According to Reuters a military coup in Niger saw prices rise even though mining operations have continued in what is a top 10 uranium producer. Reuters reported the spot price of uranium had hit $56.25 a pound on the development, with the price having doubled over the past three years.
For all the potential bluster regarding the positive outlook for the nuclear sector it is clear that the business that underpins the global business – fuel supply – is seeing significant growth in prices and production. Those investments and prices reflect undeniable market fundamentals and suggest that, for now at least, the nuclear future is assured.
By David Appleyard, Editor, Nuclear Engineering International