Uranium prices continue to surge as investors see a growing demand for nuclear energy. As well, interest is being fueled by a relatively new uranium fund on the market. Kim Parlee speaks with Greg Barnes, Managing Director at TD Securities, about the outlook for uranium.
- Since the Fukushima nuclear reactor disaster in Japan back in 2011, the uranium market has effectively collapsed, or did collapse. And uranium prices went from at the peak of $140 a pound in 2007 or 2008 down to about $18 a pound just because nuclear-generating capacity globally was shrinking, with Japan offline, Germany going anti-nuclear, and a number of other countries doing the same thing. And there was a shrinking demand and too much supply because Kazakhstan was ramping up production. So you had a massive offset-- too much supply, not enough demand, and the price collapsed.
But after 10 years, we finally worked through this bear market, and nuclear-generating capacity is growing again globally. It's now back above where it was pre-Fukushima. And supply has been constrained by the producers shutting in production because they just weren't making money at the very low prices we were seeing.
So you had this bear market evolve to the point where you've effectively got to a pinch point, where supply is not keeping up with demand, and you're shrinking the inventories that were built up over the last 10 years.
- Can I dig in a little further on the demand side, too? Because you talk about stuff-- finally, there was, I'd say, more of a balance in the market, and now you've got this pinch point, as you described it. But I know a lot of people I've spoken with talk about the impact of ESG and what that could mean for nuclear going forward, too. And maybe just giving your thoughts behind that.
- Well, that's a very interesting topic given the fuel crisis, the energy crisis, we're now seeing in China and in Europe. And I think it's highlighting the fact that, globally, we cannot rely purely on solar and wind. You need baseload power, and you need baseload green power, and nuclear is perfectly suited for that. So I think nuclear-generating capacity is suddenly having a light shining on it, that this is something that the world probably needs over the longer term. And given the massive underinvestment in nuclear power, particularly in the West, perhaps we need to rethink that approach.
So ESG, I think, is fitting into it, because at the bottom line, nuclear power is probably one of the greenest sources of baseload power that we have.
- You can't, though-- and again, from my limited research, and you can let me-- this is not something I assume you'd flip a switch on and say, great, we're going nuclear. Let's all just shift the baseload tomorrow. I expect it's expensive to build, and I mean, never mind all the regulations and everything because of Fukushima at the same time. So how much of the action that we're seeing in the market right now is speculative as to what's coming, and how much do you think will actually deliver fundamentally, in the longer term?
- Well, there's no doubt there's a speculative element to what's going on in uranium and the uranium price and the uranium equities. The Reddit crowd has certainly grabbed a hold of this with a passion, and they're chasing it down. So that is having an impact, no question. But I think the underlying fundamentals behind what's happening in uranium and what needs to happen in nuclear power are real, and they're not going away. And I think this is a long-term positive story for both, for uranium and for nuclear power.
- So for someone who is listening and thinking, OK, this is interesting. You can either think that this is going to go up or maybe you think it's going to go down. There's different ways of playing this. You can either look at the commodity or the producer. Maybe you could just talk about maybe the benefits and risks of both sides of that, but things you need to consider. Because I'm assuming with producers, there's the complicated business of actually getting the uranium out of the ground and all that entails, too.
- And you layer on top of that, Kim, there aren't very many listed equities globally that are actually uranium producers, as you can count them on one hand-- less than one hand, in fact. So your options are fairly limited in terms of what you can buy to get direct production exposure to uranium. There are a lot of exploration companies. There are some very high-quality exploration and development companies out there. You can probably count those on two hands.
If you want real leverage, clearly, you go with the producers, although the uranium price has been very volatile lately. up and down $5, $10 a day, which again is something we've never seen before. But I do think there's-- like I said, I think there are fundamental factors behind this that are really going to continue to push the price higher. So depending on which way you want to lean-- do you want leverage, or you want to participate in the upside in the commodity itself?
- Yeah. Lots of just buyer beware in terms of some of those the risks that are there. Greg, great pleasure talking to you. Thanks so much.
- Thanks, Kim.