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| Uranium |
The uranium market has experienced significant volatility in 2024, raising concerns among investors. After reaching a 17-year high of $110/lb in January, uranium prices have since declined to around $71/lb. Despite this drop, long-term fundamentals remain strong, with increasing demand from nuclear energy expansion and data center power needs. Canaccord Genuity advises investors to focus on the term price, which continues to rise and provides a better long-term market indicator.
Uranium Demand: Nuclear Energy and AI Expansion
Nuclear Energy Growth
The global nuclear sector is expanding, with 440 reactors currently in operation and 65 under construction. China leads with 28 reactors under development, aiming for 200 GWe by 2035. India follows with 10 reactors in progress, reflecting a strategic push for nuclear energy. This expansion is expected to drive a 3.6% CAGR in uranium demand through 2035.
AI and Data Centers
The surge in AI-driven computing has significantly increased electricity consumption. Data centers are projected to consume over 10% of U.S. electricity by 2030. Major tech firms like Microsoft, Amazon, and Google are investing in nuclear energy to secure stable, carbon-free power, reinforcing uranium’s long-term demand prospects.
Challenges in Uranium Supply
Structural Barriers
The uranium supply chain faces multiple challenges:
- Geopolitical Tensions: The U.S. ban on Russian uranium imports has disrupted global supply chains, leading to higher conversion and enrichment costs.
- Labor and Technical Constraints: Industry expertise diminished after Fukushima’s market downturn, making ramp-ups challenging.
- Regulatory and Financial Hurdles: Permitting delays and environmental concerns have stalled projects like NexGen’s Rook I, prolonging construction timelines.
- Delayed Production: Key projects, including Kazakhstan’s Budenovskoye and Canada’s Phoenix, have encountered setbacks, contributing to supply deficits.
Market Outlook and Investment Considerations
Despite short-term price volatility, uranium’s bullish long-term fundamentals remain intact. The resilience of the term price signals strong utility demand. However, sustained price action in both spot uranium and uranium equities is needed before confirming a new upward trend. Investors should monitor key developments in supply constraints and nuclear sector growth for future opportunities.
