LIVE MARKETS-Uranium scarcity: bane or boon?

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URANIUM SCARCITY: BANE OR BOON?

While the market dynamics, technological advancements and supportive policy framework are aligning to enable a nuclear renaissance, uranium procurement remains the primary hurdle to its realization, Barclays strategists say.

With the majority of uranium mining is concentrated in Central Asia, primarily Kazakhstan, its political ties to Russia renders a significant portion of global production exposed to geopolitical risks in the form of sanctions and export controls, the brokerage said.

Barclays cited a report published by the World Nuclear Association, stating that while demand for uranium is set to rise by a third by 2030, the output from current mines is expected to reduce to half its existing production by 2040.

On one hand, while uranium's complex and multi-step processing cycle makes it vulnerable to disruptions at any stage of the cycle, the strategic importance of the sector creates opportunities for companies involved in the various stages of the uranium fuel cycle.

The Global X Uranium ETF URA.P jumped more than 100% year-to-date, set for its best yearly showing on record, according to data compiled by LSEG.

"We see the evolving picture related to uranium and the associated contingency of nuclear build-out as a risk that is underappreciated, and underpriced, by the market," said Barclays strategists led by Jordan Isvy in a two-part note series titled "Nuclear Renaissance."

The need for nuclear power to support the insatiable data center boom has not only brought the uranium trade to the forefront of investor focus but has also led to the research of potential alternatives for the scarce commodity.

"One potential alternative that is considered is thorium, with thorium reactors less prone to meltdown and therefore deemed safer," Isvy said.

However, their lack of commercial readiness makes uranium dependence the best bet for power producers in the near future, Barclays said.

(Kanchana Chakravarty)

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