Uranium: An Undercurrent of Supply Problems

On Monday, we began our coverage of uranium, a commodity that’s fallen out of the spotlight amid an undercurrent of threats weakening AI stocks.

As I explained, uranium is the fuel source for nuclear power and has been spruiked as the ultimate ‘energy source’ for gaining the upper hand in AI.

Yet I also explained that there’s much more to uranium than its hazy links to an AI build-out.

You see, nuclear is the ultimate solution for national energy security.

We detailed the French example and how its unwavering commitment to nuclear has given the country an energy moat.

France has offered the playbook on energy security, and now other energy-starved countries are catching on.

Meanwhile, France is doubling down on its ‘nuclear advantage’, extending the operating life of its 57 nuclear reactors, plus building a further 6 reactors, and leveraging its expertise into small modular reactor technology.

As I explained, France isn’t just idling along with its existing electricity capacity; it’s actively building volume to deliver energy for generations to come.

But today, we’re going to focus on the twist in this energy strategy.

A potential threat to France’s energy moat.

And for that matter, any other country looking to repeat the French playbook.

Uranium Supply

As is typical of Western European countries, France is NOT endowed with large uranium reserves.

Uranium production is concentrated in a handful of countries, chiefly Kazakhstan, Canada, Namibia, Australia, South Africa, and Niger.

Other than perhaps Australia and Canada, none of the above countries offers much in terms of secure long-term supply.

Niger recently nationalised the mines of a French-owned miner, Orano.

As I’ve highlighted in the past, resource nationalisation has become a core issue across West Africa.

For France, this means an end to its decades-long uranium supply from Niger. And that has forced it to scour the planet for alternatives.

France: a victim of its own success.

But there’s another thorn in France’s economic crown jewel…

As more countries try to repeat the French playbook and pivot toward nuclear power, demand for uranium will rise.

That means France will face more competition from buyers just as its key supplier, Niger, goes offline.

More global reactor construction equals MORE demand for uranium. It’s a simple equation.

You see, unlike other commodities, which are built on opaque demand forecasts, uranium holds a very clear growth pathway.

A one-for-one link to the number of reactors being built across the globe.

So, how’s that looking right now?

According to the World Nuclear Association, at least 70 nuclear power reactors are currently under construction worldwide.

That represents one of the highest levels of activity since 1990.

But this is not the 1990s

Back then, supply pressures were eased thanks to the “Megatons to Megawatts” program.

This was the landmark US-Russia agreement that converted 500 metric tons of Russian weapons-grade uranium—enough for 20,000 nuclear warheads—into low-enriched uranium.

The program started in 1993. But ENDED in 2013.

For years, the world’s largest uranium buyer, the US, purchased the material to fuel civilian nuclear power plants, providing roughly 10% of America’s electricity demand.

For decades, the uranium market was saturated with Cold War-era warhead supply.

Any demand from an uptick in reactor construction was met with a flood of enriched Russian uranium.

The West: Uranium leftovers.

As you read this, China has almost 28 nuclear reactors under construction.

And to be clear, these are not in planning or approval; the multi-billion-dollar projects are under construction.

Once they come online, fuel demand will rise.

But uranium buyers, the energy utilities, won’t be entering this market on even footing.

With the world’s largest number of reactors under construction, China will hold a massive advantage in terms of pricing power in this market.

China will have the pick of the supply; everyone else will have the leftovers.

It’s a dilemma that could threaten the West’s reliance on Kazakhstan, the world’s largest uranium supplier.

China is already heavily interwoven with Kazakhstan miners in both current and future projects. State-run companies own stakes in Kazakh miners.

China also invests heavily in ‘goodwill’ projects for its uranium-endowed neighbours, sweetening contract deals by offering to build railways, highways, ports and bridges.

That’s why China is destined to capture the lion’s share of uranium production from this region, and that doesn’t bode well for everyone else.

Next time, we’ll try to unpack where that alternative supply MIGHT come from.

Until then, take care.