Yesterday we finally saw uranium stocks lift, after dragging along sideways for weeks even as uranium marched steadily higher.
The first chart below is of URNM, the Sprott ETF of uranium miners; the chart below that is the spot price of uranium. The comparison shows how uranium stocks responded nicely to the rising spot price in September and October but then stalled out, trading sideways for the last two months while uranium moved from $74 per lb. to $92 per lb.
The URNM chart also shows how uranium stocks did seem to move distinctly higher yesterday, snapping back to mirror the spot price (which jumped $1.25 per lb. on the day! And another $1.13 today! Neither of those gains are shown on the chart). It all happened because of this:
The US Department of Energy (DOE) asked uranium enrichment companies to pitch it with proposals to produce High Assay Low Enriched Uranium (HALEU). A less-structured request for HALEU production proposals late last year didn’t garner a lot of response so it seems the DOE stepped up its game here, promising up to $500 million in HALEU contracts and asking for minimum 10-year terms.
I realize this needs some explaining.
HALEU is the fuel used in small modular and advanced reactors. And there is currently no commercial-scale production on HALEU in the West; it all comes from Russia. The US is clearly trying to reduce its reliance on Russia for all things energy and supporting a rapid build-out of domestic HALEU capacity is key to that, especially if new and small modular reactors are integral to America’s long-term clean energy plan.
This announcement is specific to HALEU but it is likely the first step in US government support across the uranium fuel cycle, from production to conversion (turning yellowcake into gaseous UF6) to enrichment (centrifuging UF6 to increase to ratio of the more radioactive isotope) to LEU enrichment (low enriched uranium is what goes into fuel rods in most large reactors today). Russia dominates this entire fuel cycle and establishing this capacity in the west is key to creating confidence in increased reliance on nuclear power.
This announcement is part of a long process to do that, but it also comes at a notable time: just last month the US House passed a bill to ban uranium imports from Russia. The bill still needs to pass the Senate and be signed by the President before becoming law…and it is more likely to pass the Senate if there is clear support for new fuel cycle development in the US, either within the bill itself or alongside.
Bottom line: this DOE announcement is another clear message that the US government wants domestic uranium production and processing. That it happened as the Senate considers the Russian uranium import ban underlines the political risk here – if the US bans Russian uranium, in a bill that includes all kinds of caveats and exclusions to ensure supplies are available if necessary, who’s to say Russia doesn’t immediately retaliate and ban exports to the US, without any caveats?! That would immediately send the uranium price skyward.
And small modular reactors are the swing demand that could make an extremely tight market almost impossible. SMRs are not yet commercial but the US and Canada want to have some operating commercially by 2030. If things line up to make that possible, it would add new demand in 2025/2026, when SMR operators would need to secure fuel for their upcoming reactors. And longer refueling cycles mean SMRs need 10 years of supply or more at the outset. This announcement is a big step in helping SMRs happen, thus increasing the likelihood this additional uranium demand materializes…in a market with less than none to spare.