Countries worldwide are swiftly returning to nuclear power in their efforts to curb carbon emissions and strengthen their energy security. Following many years of reticence ignited by catastrophes, the part nuclear energy plays in the global energy output is anticipated to significantly increase in the coming era, with massive financial investments being made globally for the necessary infrastructure development.
Nuclear power made up approximately 17% of the world’s total electricity generation mix at its highest point in the mid-80s. However, the calamitous incidents at Chernobyl and Fukushima in 1986 and 2011, respectively, led to its dwindling to a mere 9%, according to data from Goldman Sachs Research. Yet, the establishment projects a rebound in nuclear power to contribute 12% to the total global energy production by 2040, in an attempt to cater to the world’s expanding power necessities.
To achieve this considerable uptick in nuclear energy, a significant surge in uranium production will be necessary. This will potentially result in a supply shortage that analysts believe could appreciably benefit companies involved in mining this radioactive heavy metal element.
Calculation post the COP29 event in November, which witnessed 31 countries committing to the goal of multiplying the global nuclear generation threefold by 2050, there has been a whirlwind of transformations in nuclear policies worldwide. U.S. President Donald Trump, for instance, issued executive orders in May to fast-track the adoption of nuclear energy.
In the United Kingdom, recent approvals have been granted to Rolls-Royce’s new Small Modular Reactors, alongside several billion pounds’ worth of funding for the Sizewell C plant. Meanwhile, Japan has rebooted vital nuclear reactors, and Germany has relaxed its position on nuclear power. The EDF Sizewell B nuclear power station will pave the way for Sizewell C in the years to come.
Both the United States and China have high ambitions for nuclear power generation. The U.S. plans to increase its output from the current 100GW to 400GW by 2050. Simultaneously, China aims to reach a target of 200GW, with an aggressive plan to construct over 150 nuclear reactors in the next decade and a half.
In light of these developments, Goldman Sachs projects the worldwide nuclear generating capacity to escalate from 378GW currently to 575GW in the next 15 years. Currently, 61 nuclear reactors are under construction across 15 nations, with roughly half of them in China. Moreover, there are approximately 85 new reactors planned globally with another 359 in the proposal stage.
In terms of uranium production, the annual output is predicted to grow from 80,000 tons at present to nearly 95,000 tons in 2030, before finally dropping down to around 60,000 tons by 2045. Goldman Sachs also predicts a shortage of around 17,500 tons by 2030, leading to a deficit of 100,000 tons by 2045 due to the online arrival of new reactors.
The bank comments that this structural deficiency will likely cause uranium prices to hike, which in turn might lead to the surge of nuclear uranium mining stocks. Meanwhile, uranium prices have been treading a downward path and remain significantly below the record peak set in 2007.
Between the end of 2016 and the beginning of 2024, uranium prices increased considerably, only to commence a decline thereafter. This decline has been attributed to a surplus in supply exerting downward pressure. The complicated U.S. diplomatic relations with major uranium producers Canada and Russia have further impacted price trends.
An investment play in uranium stocks might be in the offing, with ETF products exposed to uranium miners predicting a structurally undersupplied uranium market facing heightened demand pressure. Hector McNeil suggests that conditions for a prolonged bull run in uranium are falling into place, encouraged further by changes in the World Bank’s stance.
Presently, there are only a handful of London-listed stocks in the uranium sector. For investors seeking exposure to uranium, key industry players include Yellow Cake, Aura Energy, and the industry giant Kazatomprom. The latter, representing over 40% of the world’s primary uranium supply as of 2019, is regarded highly in the share analysis realm.
Regardless, caution has been urged to investors by BlackRock Investment Institute, referring to balancing trade-offs between energy sustainability, affordability and security. While nuclear power, U.S. natural gas, and renewables present opportunities, the institute stressed that due to the considerable time needed to construct nuclear power plants, natural gas and renewables will likely be beneficiaries sooner.
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