As uranium and nuclear energy continue to move into the mainstream, soaring prices and the escalating Russia-Ukraine war threaten to derail that progress. Anthony Okolie speaks with Greg Barnes, Managing Director, TD Securities, about the risks facing the uranium industry.
Greg, the war between Russia and Ukraine is very much in the minds of people around the world, and as well as the unquestionable human tragedy that's unfolding in that country. Now, the conflict is still in its early stages and already we're seeing some impact on global commodity markets, specifically uranium, which is one of those markets where the spot price is up substantially. What impact is this conflict having on the uranium price?
- Well, it's having a substantial impact on the uranium price itself. Over the past two weeks, the uranium price is up about $6 a pound. Now, at around $51 US. So that's 15%, 16% increase over the past couple of weeks.
So as you mentioned, with all commodities, the war is having a dramatic impact. And I think it's concerned about supply. Russia is a very large player in multiple commodities in terms of the world markets. And the sanctions are effectively shutting them off from the rest of the world. So there's a potential supply gap developing. And it's not just in uranium. It's in other commodities as well.
- And, of course, Western countries have introduced numerous sanctions against Russia, including cutting off financial institutions from Swift and hitting banks with crippling restrictions. What does this move mean for global supply?
- Of uranium? It's not totally clear yet, because uranium and nuclear fuel has not actually been sanctioned at this point specifically. So technically, I understand you can, or utilities can, buy nuclear fuel from the Russians. But I think it's becoming very difficult because of the payment system, the Swift payment system, shutting them down. And morally and ethically it becomes a very big question for Western utilities.
Do you support the Russian regime by purchasing their materials? So I think people have to sit down and really think about how they're going to move forward with nuclear fuel supply and where exactly it's going to come from.
- You know, after the Fukushima nuclear reactor disaster in Japan back in 2011, the risk appetite for uranium collapsed. Can we see the same thing potentially happening as a result of the Russia-Ukraine conflict?
- Sure. Look, it's a volatile situation in Ukraine. Events are happening at a very rapid rate. There have been attacks against nuclear plants. And one of them has been taken over by the Russians.
At this point, though, we are not looking at a Fukushima-type situation. We haven't had a reactor meltdown. The reactors, at this point, as far as we know, are operating normally or have been shut down. So no, I don't think we're looking at a Fukushima-type situation.
That being said, investors are going to be very cautious because this is an evolving situation. There are 15 operable reactors in Ukraine. There's an invasion going on. We don't know what the end result of this is going to be.
Hopefully, people are responsible, the Russian regime is responsible, and we don't get into a situation where one of the reactors is in a difficult situation. So I would say, again, it's right to be cautious. But I don't think we're going to see the same type of fallout that we saw post-Fukushima on the nuclear sector.
- OK, so those risks aside, realistically how quickly can the EU transition to clean energy?
- Well, the transition is underway as we speak. With a lot of countries there moving towards renewables in a very, very big way. And I'm talking solar and wind power. But that's not good enough to support a large country-wide grid. It doesn't give you that always-on power that you need to stabilize the grid. And nuclear power does do that.
I do believe nuclear can play a role in Europe and globally in a low carbon world. We know it doesn't emit carbon. But it takes a long time to build a nuclear reactor. It takes a long time to shift energy mix towards nuclear. So I don't think it will have an immediate impact. But over time, I think it will have a big impact in terms of nuclear power being more widely accepted.
But the fallout from the war in Ukraine is that countries in Europe, like Germany, who've been on a process of shutting down their nuclear reactors, are having to rethink that very quickly and in short order. If they are cut off from Russian natural gas and oil, that would leave a big gap in their power supply. So Germany itself was on target to shut down its remaining three reactors this year. They may not do that given the situation we are in.
- And what's the impact of the EU labeling nuclear energy as an investable green energy source?
- Well, I think it's a long-term impact. Again, it highlights that nuclear power is a green energy source. Some people will dispute that, but I think broadly that's accepted. And I think it just puts further credibility behind nuclear power as something that investors should accept, governments should accept, and it's going to be a key component of a low carbon world going forward-- or should be a key component of a low carbon world going forward.
- And finally, there's been a lot of uncertainty and volatility in the markets as we know over the last couple of weeks. What should investors be focusing on right now?
- Well, in terms of nuclear power, I think we have to obviously watch the situation in Ukraine very carefully, be aware of the risks, but also the opportunities of what this could mean for nuclear power longer term. If Russia is effectively sealed off from the rest of the world in terms of their ability to deliver nuclear fuel power to utilities outside of the Russian orbit, that will mean utilities globally will have to reshift their fuel supply portfolios. And that will benefit the companies in the West that factor into that market.
- Greg, thank you very much for joining us.
- Thank you.