AI boom, climate change measures increase demand as new mine investment lags
The global trend toward restarting nuclear power plants — fueled by soaring electricity demand from the spread of artificial intelligence as well as climate change countermeasures — has prompted a rush on uranium, raising concerns about supply shortages.
On Wednesday, the governor of Japan’s northernmost main island of Hokkaido approved the restart of a nuclear reactor there, saying it will ensure a stable power supply. A Tokyo Electric Power Co. Holdings nuclear plant in central Japan’s Niigata prefecture is also moving toward resuming operations, with local consent.
The U.S. is also in the midst of a push to relaunch nuclear plants, driven by tech giants seeking power for their energy-hungry AI data centers.
In October, U.S.-based NextEra Energy announced an agreement with Google to restart by 2029 the Duane Arnold nuclear power plant in the Midwestern state of Iowa, which was closed in 2020.
“Our partnership with Google not only brings nuclear energy back to Iowa — it also accelerates the development of next-generation nuclear technology,” said NextEra Chairman and CEO John Ketchum.
Constellation Energy, a major U.S. power company, last year partnered with Microsoft on a plan to reignite Unit 1 of Three Mile Island, the site of a major nuclear accident, by 2028.
“I have not seen this kind of support for nuclear power across the globe in a very long time,” said Jonathan Hinze, president of uranium research company UxC. “The last time we were witnessing this level of interest in nuclear expansion was in the mid-2000s.”
The trend stems from a variety of factors, including a surge in electricity demand caused by AI data centers, an effort to reduce carbon dioxide emissions as part of climate change measures, and the growing importance of energy security amid heightened geopolitical risks worldwide.
Nuclear power plants, which generate electricity using the heat from uranium fission, do not emit carbon dioxide and can be operated almost nonstop. Unlike fossil-fuel-based power plants, once uranium fuel is loaded into a reactor it can run without additional fuel for a long period of time.
Restarting nuclear plants directly leads to higher demand for uranium. Global nuclear power generation capacity is expected to double from 2024 to 746 gigawatts by 2040 under mid-range estimates, according to the latest forecast released by the World Nuclear Association in September. Global uranium demand for nuclear reactors would also double from 2025 to 150,000 metric tons of elemental uranium.
Prices are on a long-term upward trend. The spot market price for uranium concentrate was $75.85 per pound as of Monday, according to UxC. Though down from the peak of over $100 hit in January 2024, the price is still more than double that in early 2021, when prices started rising.
The long-term contract price, which is said to better reflect actual demand from power companies and others, was $86 on Monday, higher than the spot price and at its highest level since 2008.
Concerns that growing demand is outstripping supply growth and that supply shortages will worsen in the future are supporting uranium prices. Past declines in demand and prolonged low prices have led to a lack of investment in new mines. Some current demand is being met through secondary supply drawn from excess inventories.
Additionally, many existing uranium mines will be depleted in the 2030s. Maintaining and expanding supply will require developing new uranium mines, something that takes decades and huge amounts of capital.
BHP, the Australian mining giant that owns interests in the country’s Olympic Dam mine, one of the world’s largest uranium deposits, noted in its annual report this year that a supply gap caused by rising demand and a lack of investment could periodically push up uranium prices.
Uranium is also becoming an investment target amid expectations of higher prices.
“We’ve seen a notable shift in our shareholder base,” said Andre Liebenberg, CEO of uranium investment firm Yellow Cake. “At IPO, interest came mainly from specialist uranium and commodity funds. Today, we are attracting more generalist institutions as well as a growing number of retail investors.”
Higher uranium prices do not directly translate into higher electricity bills. Fuel costs account for only 10% to 20% of nuclear power generation costs, compared to 60% to 80% for thermal power generation using natural gas or coal.
“Rising market prices encourage producers to increase production and invest in development, which could lead to a more stable fuel supply in the long run,” said Masato Nabeshima, senior researcher at the Japan Electric Power Information Center.
Source: Nikkei Asia
