Uranium, the key ingredient for fueling nuclear reactors that generate 10% of the world’s electricity, is largely supplied by a single company — Kazakhstan’s state-owned Kazatomprom. Representing over 40% of global uranium production, Kazatomprom has held unrivaled influence over this critical energy commodity. However, in a shocking announcement that rattled energy markets overnight, the company drastically lowered its 2024 production outlook by nearly 15%. This revelation highlights the risks of the nuclear industry’s heavy reliance on one supplier and raises serious concerns about meeting rising uranium demand in coming years.
On February 1st, Kazatomprom reported full year 2023 production roughly 4.5% under target. More significantly, the company downgraded its previous 2024 forecast from 25,500 tonnes to a range of just 21,000-22,500 tonnes. That equates to a shortfall of 9-9.5 million pounds of the uranium oxide compound, known as U3O8, that fuels reactors worldwide. Instead of the nearly 10% year-on-year increase that Kazatomprom had guided for 2024, the revised target now suggests production growth could be as little as 2.4%.
Kazatomprom blamed limited access to sulfuric acid, an essential material for uranium extraction, and delays in bringing new mines online. And hints for 2025 were equally ominous.
Just five months ago, Kazatomprom stated it would ramp up volumes to fulfill multi-year sales contracts that start in 2025. Those ambitious plans now look dubious given infrastructure and supply chain struggles.
Why does this matter?
Nuclear reactors currently provide 15% of global electricity — 55% of global carbon-free electricity — all of which relies on a steady uranium supply.
Roughly 80% of that supply comes from just ten mines around the world.
So problems for even a single major operation can significantly impact availability. With many countries targeting increased nuclear generation to enable clean energy transitions and improve energy security, uranium demand is expected to rise significantly by 2050. But already, analysts warn that existing and planned projects cannot deliver sufficient additional supply in the short to medium term. With demand rising faster than supply, a structural deficit is forecast within just a couple of years.
Against that backdrop, Kazatomprom’s downgrades take on greater significance. As the source of over 40% of mined uranium globally, Kazakhstan holds immense influence over this small commodity market. If the state-backed company struggles to deliver expected volumes, replacement supply cannot easily be sourced elsewhere. Coupled with production woes at mines in Canada, Africa and Australia in recent years, uncertainty over Kazatomprom’s capabilities intensifies worries about inadequate uranium for the expanding global nuclear fleet.
Sulfuric acid shortages encapsulate the broader risks across the uranium supply chain. For Kazatomprom, which requires almost 3 million tons of acid annually for Kazakh mines, obtaining enough supply became challenging. The company is building a new acid plant, but when operational in 2026 its 800,000-ton capacity will still leave significant reliance on imported acid.
Mine development delays further highlight susceptibility to supply chain kinks. With most uranium projects taking over a decade to advance from discovery through permitting to production, schedule overruns can markedly slow output growth. As the easiest deposits become depleted, bringing newer, complex projects online on budget and on time is crucial yet increasingly difficult. Even for a company of Kazatomprom’s size and expertise, these headwinds have proven formidable.
Following the Kazatomprom announcement, the uranium mining equities surged.
The nuclear fuel market is clearly skittish about availability shrinking just as reactors need more supply. For nuclear-power focused utilities, there is increased impetus to lock-in contracts before scarcities spark further volatility. In the past, many believed Kazatomprom could “open the taps anytime”, however with four consecutive years of missing targets, this seems doubtful.
And with the low-carbon nuclear industry relying on a supply pipeline centered heavily on one company’s assets, questions mount over the wisdom of such concentration. This supply side shortfall drops as another weight on the scales tipping toward higher and less predictable uranium pricing.
Considering the significant purchasing needs of utilities in coming years, price forecasts look untenable and volatility seems assured.
In this tightening environment, utilities must lock in contracts rather than gamble on fluctuating spot market exposure. And investors would be prudent retaining uranium positions for the long haul given indicators of sustained high prices as demand outpaces constrained supply.
The time has come to ride the momentum wave building around uranium, with Kazatomprom's downgrades signaling that wave may have much further to swell. My advice is to stay unapologetically long this essential commodity as its bull market strengthens. I expect hesitant utilities will now face growing pressure to get off the sidelines and secure necessary fuel, likely sending uranium on its way to pricing levels few can even fathom.
