What is uranium, and why should you care about it now?

Investing.com -- UBS says uranium is back in focus as the fuel powering what it calls a “nuclear renaissance.” 

In a new report, analyst Amy Yi Li wrote that “uranium is the commodity fuelling the nuclear renaissance,” describing it as a “high energy-density, high baseload & low emission fuel source.” 

From a more general point of view, it is described as a naturally occurring radioactive element.

UBS argued that nuclear and uranium have “re-emerged at the nexus of growing electrification demand vs decarbonisation,” and said strong policy support could drive “a paradigm shift in the structural demand outlook for uranium.”

UBS noted that today’s market is shaped by what it called “a contracting cycle dilemma.” 

According to the firm, “utilities are contracting slowly and reactively despite rising uncovered requirements,” which has led producers to “hold back on the release of latent supply/ investment in new capacity.” 

At the same time, UBS explained that physical uranium trusts “accumulate inventory and remove volumes from the spot market, tightening the market and driving spot price spikes.” 

While UBS sees trusts as an important near-term force, it argued that utilities’ uranium demand can be deferred but not avoided.”

Demand growth is central to the bank’s thesis. UBS forecasts uranium consumption to grow more than 50% by 2035, accelerating as new reactors are built in China and India and as refurbishments increase in the 2030s. 

But supply remains constrained, with approximately 75% of global production concentrated in Kazakhstan, Canada and Namibia. UBS stated that “structural underinvestment and execution challenges could prolong project lead times.”

On balance, UBS expects the market to remain in deficit through 2029 before “a persistent, widening deficit” emerges in the 2030s as demand outpaces supply.