Kazatomprom (LON: KAP), the world’s biggest uranium miner, has been trending last week due to concerns about its ability to meet uranium production demands over the next two years. KAP contributes approximately 20% of the world’s annual uranium metal production.
This news comes at a time when the uranium supply is facing many problems. These supply and demand issues have caused uranium prices to soar last week, making it the highest they’ve been in 15 years. As of January 12, 2024, spot prices were trading at US$97.45 a pound.
Looking at uranium’s history, uranium prices reached an all-time high of more than $140 a pound in 2007. A few years after, global demand for nuclear power suffered following the 2011 accident at the Fukushima nuclear plant in Japan, and demand for uranium has remained low for most of the past decade.
So, what caused Kazatomprom’s recent production concerns?
KON, who is controlled by Kazakhstan’s government, pointed to issues like not having enough sulfuric acid and delays in building new mines as reasons for the production challenges. They expect these problems to continue until at least 2025. However, we’ll know more about the impact by February 1, 2024.
It’s important to note that the overall uranium market has been dealing with other issues, such as political changes in Niger affecting shipments to European reactors and production challenges at Cameco Corp. in Canada. After the Fukushima disaster, many uranium mines were closed, and now, with the demand for nuclear fuel going up, there’s a rush to get these mines back in action.
There has also been a growing interest in nuclear energy because of efforts to reduce carbon emissions globally and disruptions in energy markets due to events like Russia’s invasion of Ukraine. Governments are approving new nuclear projects despite past problems with delays and costs.
Uranium mining stocks experienced a significant surge worldwide last week following the U.S.’s announcement that it is seeking bids to enhance domestic production of high-assay low-enriched uranium (HALEU) in a move to strengthen national energy security.
The U.K. revealed plans to construct another large-scale nuclear power plant, surpassing current projects by Electricite de France SA. This marks a substantial expansion of atomic energy in the country, the largest in 70 years. The U.K. plans to invest up to £300 million to boost production of HALEU, which is currently only commercially produced in Russia.
The conflict in Ukraine has made countries want to be less dependent on Russia for nuclear materials, and this has caused some issues for Kazatomprom. There was internal trouble when a part of a big mine was sold to Russia’s Rosatom in 2022.
Despite these challenges, Kazatomprom has promised to meet its existing contracts until 2024. However, they admit there are “considerable supply chain risks” for their plans in 2025.
This situation is important because it affects the global energy picture. The U.S. and the U.K. are making strategic moves to make sure they have enough uranium for their energy needs. As we watch how things unfold, it’s clear that uranium is becoming a crucial player in the world’s pursuit of reliable and sustainable energy sources.
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