Uranium Investors Benefit from Surge in Support for Nuclear Power
Investors in uranium are experiencing significant gains as support for nuclear power surges. Several prominent uranium-based investment vehicles have already gained over 30% in 2023, with investors confident in the positive momentum continuing due to tight supplies and strong demand.
One of the driving factors behind the rise in uranium’s value is the increasing support for nuclear power from influential bodies. These organizations advocate for nuclear power as a viable solution to replace high-polluting fossil fuels in electricity generation. Notably, a key stance reversal on nuclear power came from Finland’s Green Party, which had opposed it for decades but recently voted to classify nuclear power as a form of sustainable energy. This change has had a far-reaching impact beyond Finland, giving other Green political groups the permission to adopt a pro-nuclear stance.
Other countries have also witnessed political U-turns on nuclear power. Spain, Belgium, and Sweden have all revised their energy policies to include greater utilization of nuclear power. Even in Germany, which recently closed its last nuclear plants, there are calls to halt the dismantling of old plants in case they are needed in the future. The growing support for nuclear power has created an optimistic sentiment in the uranium market.
In addition to the support for nuclear power, the tight supply of uranium further bolsters the market. Global production of uranium has decreased by approximately 18% since 2017 due to low uranium prices discouraging mining activity. More than 60% of world output comes from countries like Kazakhstan, Uzbekistan, Russia, Niger, and China, which are considered Western-friendly nations. This shortage of production contributes to the rising price of uranium and the stocks of mining and processing companies.
These favorable market conditions have led to the substantial growth of investment vehicles such as the Global X Uranium ETF and Canada’s Horizons Global Uranium Index ETF. Spot prices of uranium and uranium futures have also experienced significant increases this year.
Despite the surge in support for nuclear power, there are concerns about the actual increase in nuclear power output. Many existing nuclear power plants in Europe and the United States are already over 30 years old and nearing the end of their planned lifetimes. Safety concerns and resistance to increasing output make it uncertain if significant expansions in nuclear power will materialize. Additionally, the cost of building new nuclear plants has skyrocketed in recent years, which further adds to the hesitation surrounding their development.
Governments committed to transitioning to cleaner energy sources may opt for expanding renewable power supplies rather than investing in new nuclear plants. The long timelines and high costs associated with nuclear plants make renewables a more attractive option. This could potentially impact the uranium market in the future.
Despite the positive outlook for uranium investors, it is important to consider the various challenges and uncertainties associated with nuclear power. While there is growing support for nuclear energy, its long-term viability and expansion will depend on factors such as safety concerns, cost feasibility, and alternative energy options.
