while nuclear fuel could become more expensive
CITI’S TAKE
Commodities views: We reiterate our tactically bullish view on uranium and still expect prices to trade above $100/lb in 3-month period. Bullish catalysts on both the supply and demand sides have recently developed, which, in our view, will lead to higher spot prices in the 2H of the year The long-term uranium price increased m/m and has now settled at $93/lb. We are updating balances and revising the projected 2026 supply lower. We continue to see increasing appetite and interest in nuclear energy, supporting our long-term bullish view on uranium demand. Equities views: Our analysis suggests nuclear restarts and uprates are progressing nicely, but we aren’t seeing early signs of hyperscaler recontracting for existing fleet. Utilities continue to wait for someone else to take cost overrun risk to build new generation. For SMRs, the progress has been steady but large-scale deployment appears to be a few years away.
Commodities view: Spot uranium prices have been range-bound lately, trading in a range of $83-87/lb, while the long-term uranium price has almost reached its 2007/2008 all-time high and now trades at $93/lb (the peak price in 2007 was $95/lb when the spot price was $136/lb). The long-term price has appreciated without a single pullback since January 2025 and has been in an uptrend since 2018. Sulfuric acid is becoming a significant problem for major and junior uranium producers due to the sustained closure of the Strait of Hormuz (SoH), and we expect that its availability will, at a minimum, limit any production increase.
On the demand side, nuclear energy continues to be favored due to beneficial power prices. In the United States, the sector is particularly dynamic: two Small Modular Reactors (SMRs) are already under construction, with another two to three potentially being approved later this year. Additionally, three plants are being restarted, and ongoing power uprates are being implemented with support from the DOE’s ‘UPRISE’ program. This domestic momentum is bolstered by Executive Orders and international interest from Japan and South Korea, which are exploring joint projects for both large- and small-scale nuclear buildouts.
Equities view: We think the prospect of hyperscaler deals with existing nuclear generation remains relatively limited given political concerns, but uprates seem to get traction. Our proprietary foot traffic tracker suggests restarts are going well but does not indicate near-term dealmaking at any plant. On the NEE acquisition, we are less worried about the NRC process despite potential concentration risk and think the additional sites may benefit NEE’s SMR development. Existing nuclear owners are on the sidelines of new nuclear development because they are unwilling to take cost overrun risk. In SMRs, while a few companies continue to execute, the progress initially will be understandably slow. We expect SMRs will be a meaningful contributor to U.S. power supply in the early 2030s. Given the large and evolving pipeline of 100+ designs, we currently favor upstream nuclear supply chain exposure, which should benefit irrespective of eventual technology winners. Within our coverage, we are most constructive on Centrus and least on NuScale.
peculative activity increased in the 1H, while utilities replacement rate is done
Volume on the spot market has been light so far, with the speculative community comprising about 30-40% of the flow. The Sprott Trust has bought close to 7 million lbs YTD and can still buy another 2 million lbs to fulfill its maximum allowed level, in accordance with the Canadian regulator. Utilities have remained torpid in increasing their replacement rates. We think that activity will pick up significantly in the second half of the year, especially around the WNFM and WNA conferences.
Separative Work Unit (SWU) prices continue to stay elevated at a historic high of $200/SWU, while tails assays are staying close to 2014 highs and are skewed to increase further due to increasing trends of overfeeding. We consider these trends to have a meaningful impact on uranium demand, especially in the Western Hemisphere. Our base case still assumes that Russian supplies will not be permissible in the US post-2027, even if there is a settlement of the Russia/Ukraine conflict in the near term.
Uranium supply expansion is hitting multiple roadblocks and severely delayed
We are revising our supply outlook for 2026/2027 lower by about 3-4 million lbs, as we expect supply from mines in Africa, Australia, and Kazakhstan to be slightly lower than initially expected. Specifically, production from the Honeymoon uranium mine was downgraded, and we now expect 1.4 million lbs (vs. the 1.8 million previously expected) due to weather-related disruptions (Resources Review, 04/16/2026). The Kayelekera uranium mine in Malawi halted its operations for two weeks due to fire damage to its electrical panels (Mining Weekly, 04/07/2026). Additionally, the mine is highly exposed to sulfuric acid supplies from the Middle East and could be challenged to increase its production; we project 1.35 million lbs will be produced this year.
In addition, we have revised our supply forecast for Canada lower, as recent floods and the destruction of the Smoothstone River Bridge slowed activity at the McArthur River uranium mine (18 million lbs per annum – 10% of global production), although the mine’s operation has been restored after being shut down for almost a month (Cameco, 05/10/2026). We are revising our supply forecast for McArthur River lower by 2 million lbs, and now expect 15 million lbs to be produced this year. Finally, we expect that some mines in Kazakhstan (especially those where reserves are harder to reach) will struggle to increase production further as the availability of sulfuric acid could be limited, and we have lowered our total Kazakhstan output forecast by about 1.5 million lbs.
About 47% of the world’s sulfuric acid passed through the Strait of Hormuz (SoH) last year, as the region is the marginal producer of this chemical, which is often used in fertilizer production. However, global imports represent only about 15% of global consumption, with the majority of production being consumed domestically. Around 40% of sulfuric acid is consumed by the mining sector, while the rest is used for agricultural needs. It is extremely difficult to quantify the reliance of uranium mines on sulfuric acid, as this greatly depends on the uranium grade, the presence of carbonates, and other factors, such as the leaching method employed, operational efficiency, and process control. However, with the disruption in the SoH, the price of this input factor has appreciated greatly (over 60% versus the pre-conflict period), and global supply chains have been significantly impacted. Figure 3 shows that projects all across the cost curve will be affected, and the marginal cost for these projects will likely increase significantly. In the scenario if SoH reopens before end of the month, we don’t think that prices on sulfuric acid will come down to pre-conflict levels, and we expect higher prices sustain for at least next 6 months as market tightened significantly.
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