Due to the increasing demand for uranium, a radioactive fuel that is in short supply due to uncertainty in supply and the rush by utility companies to buy it to meet the power needs of AI data centers, long-term uranium contract prices have reached their highest levels in over 16 years.
As the demand for uranium increases, driven by uncertainty in supply and a rush by utility companies to buy this radioactive fuel to power AI data centers, long-term uranium contract prices have reached their highest levels in over 16 years. Currently, the long-term price is approximately $79 per pound, the highest level since 2008, and is expected to continue to rise further in the coming months.
Cameco, a uranium miner, has stated that this is the best price in over a decade. "With a stronger market environment, the maximum market-related contract price we currently have locked in is about $125-130 per pound, while the minimum is about $70-75 per pound." Spot prices rose by nearly 88% last year and reached a 14-year high in February 2024, currently at around $82 per pound.
Uranium is the most widely used nuclear fuel. According to data from the International Energy Agency (IEA), as clean energy is promoted globally, nuclear power generation is expected to double by around 2050, and supply is expected to double as well.
However, according to Plenisfer Investments, this outcome seems unlikely. The marginal production cost of uranium is currently $90-100 per pound, and the uranium price needs to be at least 30% higher than this number to incentivize producers to invest in new projects. Therefore, the market is expected to continue to be in short supply for the next ten years.
Geiger Counter, a fund specializing in uranium, manager Robert Crayford says, "Companies like Uranium Energy (UEC.US) or Ur-Energy (URG.US) are limited in the number of new projects that they can undertake, but since they know that demand for existing uranium is high, they are seeking higher prices, or are happy to operate through spot sales."
Goldman Sachs stated in a report in May that global electricity demand from data centers is expected to grow by 160% by 2030. At present, the electricity demand from data centers accounts for 1% to 2% of the total electricity consumption in the world.
It is worth noting that the United States is pushing for large technology companies to invest in climate-friendly energy generation to meet the growing demand for AI. It is expected that nuclear energy companies such as Constellation and Vistra will benefit from this trend. In addition, experts say that the rise in demand from utilities is helping to bridge the gap between term and spot prices.