How the war in Ukraine enriches uranium miners

Nuclear power and armament are scary words to say together, even in the context of energy.

This fear is behind a rally in a key fuel that has not yet been hit by a physical shortage. Uranium oxide prices have risen to $57.50 a pound, a level last seen more than a decade ago, before the Fukushima disaster tipped global anti-nuclear sentiment. They have increased by more than a third since the Russian invasion of Ukraine. Shares in Canadian uranium mining company Cameco CCJ -0.51%

up 29% year-to-date while Sprott Physical Uranium Trust,

examinee -1.02%

a fund that owns physical uranium is up 31%.

The immediate trigger is fear that uranium supplies from Russia could be disrupted. On Thursday, a group of US senators introduced a bill to ban imports of uranium, and on Monday Russian Deputy Prime Minister Alexander Novak said the country was considering banning uranium exports to the US as part of its response to sanctions, according to Reuters .

Russia isn’t actually a big miner of uranium ore, the material that’s extracted from the ground, according to the World Nuclear Association, with a 6% market share in 2020. Jonathan Hinze, president of uranium market research firm UxC, notes that the country typically uses domestically mined uranium for its own reactors. But it is a key supplier of secondary uranium, which includes so-called tailings from previously processed uranium that can be enriched. And Russia has by far the largest enrichment capacity, with about 43% of the world’s operational and planned capacity located there, according to the World Nuclear Association – more than France, Germany, the Netherlands and the United Kingdom combined. A ban on imports of uranium ore from Russia would be doable, but full sanctions on Rosatom, Russia’s nuclear energy company that also owns the Tenex enrichment unit, would be far more disruptive.

One factor that is helping to keep demand for uranium ore low is the global oversupply of enrichment capacity. According to the World Nuclear Association, much of this surplus is in Russia. Enrichment can, to some extent, replace freshly mined uranium ore. If enrichment can be compared to an orange press machine, uranium ore from the ground is similar to fresh oranges, while tailings or previously processed uranium can be considered semi-pressed with the juice still remaining.

Because Russia has plentiful and cheaper enrichment capacity, it is able to continue running depleted tailings piles through its system. Without that supply, remaining enrichment plants could start needing more ore – fresh oranges – to get the same amount of enriched uranium. Whether or not sanctions are imposed, Western utilities may be more inclined to source supplies elsewhere in future contracts to ensure security of supply. Andrew Wong, an analyst at RBC Capital Markets, said in a report that sanctions US uranium demand could theoretically increase by £10-15 million a year, or about 30% of typical annual demand.

But that’s not all. Russia’s invasion has boosted support for nuclear power as Europe seeks to reduce its dependence on Russia’s natural gas without increasing greenhouse gas emissions. Belgium recently postponed its nuclear phase-out by 10 years. France last month announced plans to build six new reactors, while British Prime Minister Boris Johnson is pushing hard to speed up the country’s nuclear energy plans. Arthur Hyde, a partner at resource-focused hedge fund manager Segra Capital, notes that since the energy crisis of the 1970s there has been a “tidal wave of pro-nuclear sentiment reversal.”

However, the association of nuclear energy with disasters will be difficult to break. Three Mile Island, Chernobyl and Fukushima each hampered the progress of the industry. Russia’s attack on a nuclear power plant in Ukraine was a reminder of such concerns. However, this could be a rare moment when fresh geopolitical fears trump fading memories of those accidents.

write to Jinjoo Lee at

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