URANIUM: FUNDAMENTALS OF SUPPLY, DEMAND AND CONTRACTING

What is uranium and why is it important?

Uranium is a naturally occurring radioactive element found in the Earth’s crust, primarily used as fuel in nuclear reactors. Symbolised as “U” on the periodic table, uranium is heavy, dense and relatively abundant. Its isotopes, U-235 and U-238, play an essential role in nuclear fission—the process by which atomic nuclei split to release energy in nuclear reactors.

In civilian applications, uranium powers nuclear reactors that generate approximately 10% of the world's electricity. In countries such as France, Slovakia and Ukraine, nuclear power accounts for over 50% of national electricity supply. Moreover, as the global focus shifts towards cleaner energy to address climate change, nuclear energy’s low-carbon footprint has improved uranium’s long-term demand prospects.

Uranium is also used in naval propulsion, particularly for submarines and aircraft carriers, and to a limited extent in radiopharmaceuticals and scientific research. However, its primary utility lies in fuelling commercial nuclear reactors through a well-established supply chain that spans mining, milling, conversion, enrichment, and fabrication.

As demand for sustainable and low-emission energy sources grows, understanding uranium as a resource—its geological availability, production mechanisms, and market structure—becomes increasingly relevant to energy planning and investment strategy.

From initial extraction to end-use, uranium's journey through the nuclear fuel cycle involves significant infrastructure, long lead times, and close regulatory oversight—all contributing to its complex and often opaque market dynamics.

This article explores uranium’s fundamentals, focusing on its demand drivers, global supply dynamics, and the intricacies of fuel contracting that underpin its commercial viability in the atomic age.

How global nuclear demand shapes uranium use

Demand for uranium is intricately tied to the global fleet of nuclear reactors, which require a stable and long-term supply of nuclear fuel to operate efficiently. Each reactor typically refuels every 12 to 24 months, consuming between 18 and 25 tonnes of uranium annually, depending on design, capacity, and operating parameters.

As of 2024, there are over 440 commercially operating nuclear reactors worldwide, with additional reactors under construction or proposed, particularly in Asia. China, India, and Russia have aggressive nuclear expansion agendas, reflecting energy security objectives and climate commitments. In addition, a resurgence of interest in nuclear energy has emerged in Western nations seeking to balance carbon targets with base-load reliability.

Uranium demand is relatively inelastic in the short term. Once a reactor is built, it must maintain a secure flow of fuel, even during times of market volatility. Therefore, reactor operators often procure uranium years in advance through long-term contracts (typically spanning 5–10 years) to hedge against supply risks and price swings.

Apart from primary uranium consumption, secondary supplies—such as re-enriched tails, downblended weapons-grade material, and recycled fuel—also contribute to global supply. However, these sources are finite, politically sensitive, and insufficient to sustain growing demand trends without consistent mine production.

Moreover, emerging technologies such as Small Modular Reactors (SMRs) and developments in fast breeder reactors could shape future uranium demand patterns, potentially increasing both volume and fuel efficiency. While SMRs promise flexible and distributed generation, their impact on uranium consumption remains speculative pending commercial deployment.

Notably, global demand estimates are shaped by geopolitical, regulatory and societal factors. For example, Japan’s reactor restarts post-Fukushima have been slower than anticipated, while Germany has entirely phased out nuclear power. In contrast, new large-scale installations in China and the UAE have provided a fresh demand boost.

Overall, uranium demand forecasts rely on nuclear reactor deployment, life extensions for existing plants, public acceptance, and climate imperatives. According to scenarios by the World Nuclear Association, global uranium requirements could rise from approximately 60,000 metric tonnes per year to over 100,000 tonnes by 2040 if long-term climate goals are aggressively pursued.

Understanding demand requires not just reactor count, but also policies influencing plant longevity, design progress, and international collaboration on nuclear development.

What drives uranium supply and availability?

Uranium supply is dictated by a balance between primary mine production, secondary sources, and inventory drawdowns. Historically, primary production has met the bulk of global uranium demand, though recent years have seen this gap supplemented by utility stockpiles, governments and reprocessed materials.

Primary mining remains the cornerstone of uranium supply. Leading producing countries include Kazakhstan, Canada, Namibia, Australia and Uzbekistan. Kazakhstan, in particular, has emerged as a dominant force, accounting for over 40% of global uranium production, primarily through In-Situ Recovery (ISR), a cost-effective and environmentally lighter technique.

However, uranium mining is deeply cyclical. Mines are capital-intensive, involve long permitting and development timelines, and often face local opposition. Given low uranium prices during the 2010s, several major producers curtailed output, mothballed operations, or deferred new projects. This strategic underproduction tightened market supply, meaning that current production meets only about 70-80% of reactor demand—a gap partly filled by existing inventories and secondary sources.

Secondary supplies include decommissioned military stockpiles, commercial surplus, and various recycling methods. While these have historically played a significant role—such as the “Megatons to Megawatts” programme between the US and Russia (1993–2013)—they are largely considered finite and less reliable going forward.

Exploration for new uranium deposits continues, yet discoveries are comparatively rare. The time from discovery to production can span a decade or more. Moreover, mine economics are highly sensitive to market pricing; too low a price renders new projects economically non-viable, creating future supply issues.

Furthermore, geopolitical considerations can affect uranium availability. Export policies, trade restrictions, and strategic stockpile movements by countries like China and the USA introduce complexities. For example, recent moves by Western utilities to reduce dependence on Russian conversion and enrichment services highlight the fragility of global supply chains.

Inventories held by utilities, traders and governments act as both a buffer and a speculative lever. Utilities may delay purchasing during low-price periods by drawing on stockpiles, only to return to the market en masse if sentiment shifts—creating cycles of sudden demand and price volatility.

Supply is also affected by unexpected disruptions such as floods (e.g., Cameco’s Cigar Lake), global pandemics, or regulatory actions that change project viability. In this regard, long-term contract signals become vital to miners planning future production.

In the medium to long term, new production will likely be needed to meet demand growth forecasts. A sustained increase in uranium prices could re-incentivise exploration, accelerate restarts of idled capacity, and unlock new mining ventures.