War in Ukraine and energy transition drive up uranium price
Published: Wednesday, Dec 18th 2024, 11:20
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Uranium has become massively more expensive in recent years. This is due to the war in Ukraine, but also to the energy transition. For the Swiss operators of nuclear power plants (NPPs), however, this is not the decisive factor.
Over the past twelve months, the price of uranium has "settled at a higher level", says Barbara Kreyenbühl from the Gösgen-Däniken AG nuclear power plant in response to an inquiry from the news agency AWP. The Gösgen nuclear power plant between Olten and Aarau is one of Switzerland's four nuclear reactors.
On the Comex commodities exchange in New York, uranium contracts for the coming months are currently trading at between USD 75 and 85 per pound (around 455 grams). This means that prices have more than tripled since 2020, when prices were below 25 francs. In January and February 2024, they cost over 105 dollars at times.
Only a few suppliers
Prices have thus risen to new highs and are still well above the long-term averages today, says Dirk Hoozemans from UBS. The reasons for this are limited and uncertain supply coupled with increased demand as a result of the energy transition.
In contrast to chemical combustion in coal or gas-fired power plants, electricity production through nuclear fission does not generate any direct CO2 emissions. In addition, nuclear power plants have a comparatively high capacity and generally produce evenly - unlike solar and wind power plants. However, long-lived and radioactive nuclear waste is produced and there is a risk of catastrophic accidents such as those in Chernobyl or Fukushima.
In addition to the global plans for decarbonization, the war in Ukraine and sanctions against Russia have led to shifts on the markets. Uranium is only mined in a few countries worldwide, and the enrichment required for nuclear power is even rarer: according to Hoozemans from UBS, there are only a handful of companies that enrich the fuel. A large proportion of global exports of enriched uranium come from Russia.
Many nuclear power plants are under construction
Many nuclear power plants therefore had to reorient themselves and source uranium from Australia and Canada, for example. Axpo still uses some Russian uranium in the fuel elements of the Beznau and Leibstadt nuclear power plants, as was reported on request. However, Switzerland's largest energy company only concludes new contracts without Russian involvement.
According to market experts, the somewhat normalized but still high uranium prices are therefore likely to continue in the future. "If the planned nuclear power plant projects are realized, demand for uranium is expected to rise accordingly," says the Gösgen nuclear power plant, for example.
This is also reflected in the market: monthly contracts from 2027 onwards are more expensive with prices of over 85 dollars, while those for 2028 onwards are trading at over 90 dollars. A risk premium is quite common for long-term deliveries. However, the prices show that the level will not fall significantly. However, Kreyenbühl from Gösgen does not anticipate a bottleneck. "There are sufficient uranium deposits worldwide. As uranium prices rise, new mines will be put into operation," he says.
Swiss operators have stocks
In addition, Swiss nuclear power plants obtain their nuclear fuel through long-term contracts with fuel suppliers. "Swiss nuclear power plants have a stock of fuel elements to ensure operation for several years," says Swissnuclear. In addition, according to the Association of Swiss Nuclear Power Plant Operators, the share of fuel costs in total costs is low.
Spokesman René Zimmermann uses the example of Gösgen to illustrate this: the cost of nuclear fuel accounted for less than 9 percent of normalized annual costs in 2023.
According to the latest statistics, 418 nuclear power plants are in operation in around 30 countries worldwide. 61 reactors are currently under construction and 90 new nuclear power plants are planned. In Switzerland, the Beznau I and II, Gösgen and Leibstadt nuclear power plants generate around a third of the country's electricity.
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