If one needed further evidence that we are heading towards a growing supply/demand imbalance for uranium, last week’s news flow provided it.
Kazatompron, Kazakhstan’s state-owned uranium miner (and the world’s largest), announced (again) a cut to its 2025 production forecast due to continued sulphuric acid shortages and delays in construction works at new deposits. The company now expects production volumes of 25-26.5kt in 2025, down 17% from its previous target.
While sulphuric acid shortages have been a well-known challenge, the lack of skilled labor, following a decade of extremely low investments in uranium mining operations, is also likely to be a major headwind going forward for the industry and to contribute to delays in restarting idled capacity and developing new resources.
And the recently announced hike in extraction taxes in Kazakhstan (40% of world production) is unlikely to help either, with the new Mineral Extraction Tax set to increase to 9% from 6% in 2025 and to move in subsequent years to a calculation largely based on production output and, to a lower extent, uranium prices. This new tax calculation scheme appears to incentivize strong uranium prices rather than production increase, suggesting that supply growth from Kazakhstan could be limited in coming years.
Meanwhile, on the demand side, dynamics are extremely supportive amid booming power consumption from data centers. Several countries including the US and Japan are on track to restart idled nuclear plants, potentially by 2025, hinting at a short-term demand boost for nuclear fuel.
Looking at the mid and long term, the US and China have announced major initiatives allowing to frame the uranium demand outlook. Notably, China approved last week 11 nuclear reactors across five sites, a record amount of permits after the 10 reactors in each of the last two years and a total investment of at least $31 billion. Construction is expected to take about five years.
And the US recently passed the ADVANCED Act, that makes it easier to build multiple reactors at the same site by easing regulations on the second, third and fourth units, an initiative that should incentivize power utilities to order new reactors “in bulk” and that should dramatically reduce costs and construction times.
In conclusion, the uranium supply deficit, which was already well anticipated, is likely to widen further in coming years, an obvious positive for the commodity price and uranium miners.
