The nice thing about today's situation for uranium prices (and those who own it) is, like a great poker hand, it covers multiple possible futures.

In the immediate the price of the raw powder is rising as utilities and suppliers try and lock up more supply before the threat of uranium-specific sanctions takes hold.

And over the long term uranium should benefit strongly from the terrible structural predicament of global electricity supply. The West, in particular, find itself in the middle of brutal pincer move:

• We are trapped between being our reliance on Russian energy on one side and the critical importance of weaning ourselves off of fossil fuels on the other.

Unintentionally, this has neatly made the case for nuclear power.

Many knowledgeable people, including many savvy climate scientists have long been of the opinion that the battle versus climate change was never likely to be won without nuclear power but have been either unable or unwilling to make this sticky point in public - until recently.

One the very few positives of the terrible violence being visited on Ukraine and its people has been to destroy some of the false assumptions about both renewables and the strategic vulnerability of relying on energy supply from authoritarian sources.

There is only one problem:

The other, far less positive aspect of the uranium theme is that the US is very unhelpfully reliant on Russia to actually convert raw uranium powder into a usable form.

Oh didn't we mention it?

We - by which I mean the United States of America - r​ely heavily on Russia for uranium imports.​

• Russia only mines 5% of the world's uranium but it enriches more uranium for use in nuclear energy than any country on earth.

As with so many other industries we are discovering, to our deep discomfort, that our nuclear supply chain is far more fragile and dependent on Russia than we had previously realized.

It hasn't gotten a lot of publicity but the US has relatively swiftly banned Russian oil, natural gas and coal imports but continue to rely on Russia and in particular, the company Vladimir Putin founded personally in 2007: Rosatom.

We don't have the space here for a long dissertation on the corporate Russian nuclear giant but it is actually rather impressive. Rosatom enriched over 20% of the world's uranium in 2020 and provided over 16% of the US' uranium supply. Close Russian allies, Uzbekistan and Kazakhstan provided another 30%.

More relevantly for financial markets ask yourself this question: how much of US power generation comes from nuclear energy?

The answer is over 20%.

That is pretty high!

(and it over half of the US' carbon free energy)

In the past we would outline this issue to accomplish one of two goals:

1. Point out that the situation was untenable and energy costs would likely go higher.

2. Not so subtly criticize the government for relying on foreign uranium imports period, let alone Russian sourced fuel.

There is not lot of point in making either point anymore. Energy costs are already high. Sure they could always go higher but we have made all of those arguments before.

The big takeaway now is that for the US to solve any of these solutions it is is very likely that uranium will have to head higher.

Why?

Well, for several reasons:

1. The US has no strategic reserve for enriched uranium. Why? It is a critical resource surely and it also wouldn't even need to take up much space.

2. As with other industries, there is a strategic imperative for the US to have some (more?) capacity to convert its own uranium. At present there is none.

3. Further, though the US does have a single enrichment facility it has no ability to enrich its own high tech uranium called "high assay, low enriched uranium" or HALEU that is being used in the most modern next generation of nuclear reactors.

This isn't a great situation. But it also isn't unfamiliar. We are entirely dependent on foreign supply for the most advanced type of uranium as with high grade nickel or rare earths or lithium etc etc.

It is a classic tale:

We ran an efficient, global supply chain for highly enriched uranium and didn't care where it came from as long as the price was right and the delivery on time. That has all changed and now the supply chain must get less efficient and have both greater resilience (there is that word again) and more available supply.

All of which should make uranium investors very happy, especially in the short term when there is limited new supply to meet the surge in demand.

To be fair to them, the Biden administration is trying to speed along proposals for two programs aimed at developing more highly enriched fuel and creating a Strategic Uranium Reserve.

These were Trump administration ideas so it is truly wonderful to see the Biden Presidency evaluate them on their merits and also that perhaps nuclear energy could be a rare - all too rare - source of bipartisan support.

We will have to hope that they are both successful and quickly because the timelines for many of these proposals are ominous (2035 at earliest! gulp). Either way, nuclear energy is coming back into vogue and more uranium mines, more uranium enrichment facilities and perhaps even more reactors could be a part of near-to-medium future.

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