A More Competitive US Nuclear Energy Industry May Be Bullish for Uranium

June 07, 2020 EDT

In late April 2020, the U.S. Nuclear Fuel Working Group released its recommendations for restoring the United States’ nuclear energy competitive advantage and regaining global nuclear leadership.[1] We believe that these recommendations may be bullish for uranium prices.

What are the recommendations of the group? How may investors gain exposure to uranium?

The Proposed Revival and Strengthening of the Uranium Mining Industry
According to the Office of Nuclear Energy,[2] over 90% of the uranium fuel used in US reactors is produced by foreign countries.

The working group is recommending that the United States Department of Energy (DOE) establish a uranium reserve. Under this program, the Office of Nuclear Energy (NE) would buy uranium directly from domestic mines and contract for uranium conversion services. According to the working group’s report, the US would purchase between 17 and 19 million pounds of uranium beginning in 2020.

The stockpile would be expected to support the operation of at least two US uranium mines. Additional support over a ten-year period would be considered as deemed necessary to reestablish market share.

The working group also recommends restarting US uranium conversion and enrichment plants in the next two to three years.

Other Price Supports
The plan also supports efforts to extend regulation that protects US uranium miners against Russian dumping of uranium in US markets. It also enables to deny imports of nuclear fuel fabricated in Russia or China for national security purposes.

Level Playing Field and Streamlined Regulation
Nuclear energy operators are often at an advantage due to subsidies that are extended to select power generators, renewables, etc. The recommendations aim to level that playing field.

Additionally, the working group also drafted recommendations that are intended to streamline the regulatory environment and land access requirements for nuclear energy and uranium mining.

The Potential Impact on Uranium Prices
The creation and stocking of a national reserve should be bullish for uranium prices. The uranium purchased under this program would not be used to fuel current US nuclear reactors. Instead, it would be stockpiled. As uranium is purchased and stockpiled, this could effectively reduce supply and increase what is already a supply deficit in the industry.

Additionally, a level playing field on the subsidy front, as well as simplified regulation, may help to spur the development of more nuclear energy plants. More nuclear power plants will require more uranium to power them. All else being equal, more demand should trigger price increases.

Additional Recommendations
The above recommendations focus specifically on measures that may create upward pressure on uranium prices.

The working group also drafted recommendations designed to increase US nuclear competitive advantage. These included supporting and funding domestic research & development of nuclear technology, demonstrating the use of small nuclear reactors, empowering US export competitiveness, and moving into markets currently dominated by Russian and Chinese state-owned-enterprises (SOEs).

In summary, we believe that the recommendations of the working group should be bullish for uranium prices.

How may investors gain access to uranium and uranium miners?

The North Shore Global Uranium Mining ETF (URNM)
The North Shore Global Uranium Mining ETF (URNM) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the North Shore Global Uranium Mining Index (the index).

By seeking to replicate the index, URNM looks to provide investors with access to both miners and holders of uranium.

[1] Restoring America’s Competitive Nuclear Energy Advantage, US Department of Energy, April 2020
[2] Building a Uranium Reserve: The First Step in Preserving the US Nuclear Fuel Cycle, Office of Nuclear Energy, 5/11/20

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