Uranium Price Forecast 2022, Growth Expected
Source: Streetwise Reports (1/17/22)
Thenew year offers new opportunities for investors in the uranium market, aspolitical unrest in top-producing Kazakhstan promises to tighten demand on theindustry.
In a recent industry report by Haywood Securities, analysts said the problems in Kazakhstan, plus a buildup of uranium inventory by the Sprott Physical Uranium Trust, could reignite the metal's spot prices near-term and accelerate a permanent shift toward higher prices.
"Wemaintain a long-term bullish thesis on uranium demand/supply and commodityprice and believe this short-term setup could rapidly transform into a mid-termaccelerant and market tightening mechanism if there is any production impact inKazakhstan," Haywood analysts said in the report.
At least 225people have died and more than 4,300 people have been injured in uprisings oftens of thousands of people in Kazakhstan, The Associated Pressreported. Protesters stormed government buildings and set them on fire. It's the largest unrest the country has seen since it gained independence from the Soviet Union three decades ago.
"Uranium is the oneenergy source that could satisfy every Millennial and Gen-Xer on the planet;zero pollutive impact anywhere and a reliable cost-effective means of heatingthe planet and recharging Elon Musk’s vehicles."
—Industry observer MichaelBallanger
Thedemonstrations began over a near-doubling of some fuel prices in the west andquickly spread across the country. The cabinet resigned and a 180-day price capon vehicle fuel and a moratorium on utility rate increases were announced, butit was unclear what effects those moves would have on the country's stability.
Kazakhstanproduces 40% of the world's uranium, about 50.6 million pounds of triuraniumoctoxide (U3O8)in 2020, according to Haywood.
What Isthe Demand for Uranium?
Uranium frommining is used primarily as fuel for nuclear fission in power plants, but it isalso used in the medicine, food production, and space industries. There arecurrently about 440 nuclear reactors operating worldwide, according to theWorld Nuclear Association. In 2020, they provided about 10% of the world'selectricity. About 55 additional plants are being built at a time whenconventional coal-fired generation of electricity is simultaneouslyshrinking.
Most uraniumcollection is volume-intensive and done through open pit mining. AfterKazakhstan, Australia and Canada are the other top-producing countries at 13%and 8%, respectively, according to a report by ***** Metals Inc.
The sectorsuffers from stigma surrounding the risk of radiation and accidents — likethose at Chernobyl and Three Mile Island — and the element's use to powernuclear bombs. However, the Environment Protection Agency says that uranium isnot as dangerous in its exposure profile as other radioactive elements becauseit decays by alpha particles, and human skin will block the alpha particles.
The industryalso points to new studies that show other energy producing sectors areactually much more dangerous than nuclear energy. In fact, the coal industryaccounts for as many as 120 deaths per year compared to less than 0.01 deathsper year in the nuclear industry, according to the World Nuclear Association.
DoesUranium Have a Future?
Investors arehoping nuclear power will have a resurgence as governments attempt to turn awayfrom fossil fuels. Uranium prices surged 33% to surpass $40 a pound inSeptember 2021, according to a report by North Shore Global Uranium Mining ETF.They surged again to $45.25 a pound on Jan. 5, Bloomberg reported.
In general,global nuclear power-generating capacity is expected to rise 82% to 792gigawatts by 2050 as the world transitions from fossil fuels, the InternationalAtomic Agency said.
"Uraniumis the one energy source that could satisfy every Millennial and Gen-Xer on theplanet; zero pollutive impact anywhere and a reliable cost-effective means ofheating the planet and recharging Elon Musk’s vehicles," industry observerMichael Ballanger wrote in December. "Handled properly, nuclear power istruly the alternative for coal and oil and natural gas, but what spooks theworld is that the collateral damage of a ruptured nuclear power station isinfinitesimally larger than a pipeline leak or a coal fire."
The situationin Kazakhstan could lead to increased dependence on uranium companies in NorthAmerica and Australia. Haywood's top picks in the sector are
TheHaywood analysts pointed to NexGen's Arrow deposit, which they viewed as"the best undeveloped uranium asset globally,” calling it “highlystrategic." A February 2021 feasibility study outlined more than 21million pounds of U3O8 per year over a 10-year miningoperation at the site.
"Webelieve that it is critical for major producers to control this deposit becauseof its disruptive potential and that this is the strategic key to preservingthe value of existing deposits and maintaining the ability to affect price withoutput decisions," the Haywood analysts reported.
Contributing touranium's rally is the fact that the Sprott Physical Uranium Trust (SPUT) hasgathered 41.3 million pounds of the metal and has grown its assets from $630million when it launched last summer to more than $2 billion today.
"We areleft with a strong setup for uranium bulls short term, with SPUT’s return tothe spot market and refortified dry powder as the risk profile of the world’slargest producing nation just increased," Haywood said.
China isreportedly testing another alternative to uranium, thorium. Officials claim themetal is cheaper and creates less radioactive waste. They've already built areactor for a trial run using it as fuel.
But investorsshouldn't let that affect their interest in the uranium industry, analystssaid.
"Even ifChina can prove thorium's success, commercial production is unlikely to startbefore the end of the decade at the earliest, given that it can take years toassess the environmental impact of any nuclear fuel," Neha Chamaria at The Motley Fool wrote. "It's unlikely to replace uranium altogether, especially with nuclear energy gaining attention among some economies across the globe as a viable clean-energy option to meet their goals for greenhouse gas emissions."
(20min delay)