Sprott CEO John Ciampaglia remains bullish on the uranium markets, citing rising term prices, increased utility interest and the global nuclear renaissance fueled by clean energy needs and AI-driven power demands. Ciampaglia expects uranium prices to strengthen as pent-up demand grows, driven by reactor life extensions, new builds and geopolitical supply disruptions.
Video Transcript
John Ciampaglia: We think the spot price will strengthen as Q1 begins and buyers return to work. Utilities have been very quiet. The term volumes in the spot market, we don't have the final numbers yet, but estimates are around £110 million procured, which sounds like a lot of material, but that is way below replacement rate contracting. If you take out the Chinese contracts that were signed this year, which were quite large, the amount of uranium purchased by the rest of the world looks quite low, and that's why I think we remain very constructive and bullish.
James Connor: John, when we discuss the uranium market, we have to look at it as two separate markets: the spot market and the term market. And according to TradeTech, the term market price was up 14% in 2024, but the spot price was down 16%. Why did we see such a huge disparity in the prices of these two markets?
John Ciampaglia: It's a good place to start. It was a frustrating year in 2024 for uranium pricing in the spot market. But let's start with term first because that's obviously the much bigger of the two markets, the more important market we watch closely. The term market is where utilities are signing contracts for future delivery of uranium to cover their fuel needs.
Last year, we saw the term price go up every single month, and I think for 28 months in a row, we've had either flat or higher term pricing. The trend is your friend, so to speak. The price has been going up steadily, and that's because we're seeing demand signals and those demand signals are from reactors that are getting life extensions, reactors that are restarting, shuttered reactors being announced, that are going to restart, and then obviously all the reactors that places like China are building, et cetera. That's creating a lot of future demand, and those signals are there, and the price has increased.
What's also important to note is that the ceiling, one of the terms of these long-term contracts, is the upper threshold of what a company will ultimately pay when they receive their deliveries in the future, and that price keeps going up. If I think about where that ceiling price was, say 12 to 15 months ago, it was around $80 a pound. Now we're hearing those ceiling prices will be in the range of $130 or as high as $150. The prices are moving up.
Now, the spot market is much smaller, and the spot market is more, I would say, investor-driven. It is more sentiment-driven, and there we saw a big move in 2023, where the spot price was up 89%. This year, we've had a correction, and the price ended the year at around $76. And that's disappointing because all of the news flow, I would say, has been incredibly positive. It's only strengthened in terms of the fundamentals in the longer term. But investor sentiment was soft and very soft into the summer and then soft in the last couple of months of the year.
I think it's soft for a few reasons. One, I think there's just been less investor interest. There have been some distractions in the marketplace. Things like tech stocks and cryptocurrencies, I think, have taken a little bit of that investor attention away. I also think some investor attention has shifted downstream to some of the nuclear utilities. Let's shift to the spot market. Spot market is the much smaller of the two, driven by financial intermediaries and investors as opposed to utilities. Utilities historically have purchased 5% to 15% of their fuel needs in the spot market.
Sometimes, producers also come into the spot market to buy uranium, but it's the much smaller of the two markets. So, it's not as widely followed by the utilities, but it is still nonetheless a signal. Sometimes, it sends a leading signal to the market, which will often signal that the term price is moving up, which it has been doing for the last few years. But last year, the spot market had a really big move, 2023, I should say, up 89%, and this year and 2024, we've had a bit of a pullback from $91 to $76. I've had a lot of institutional investors call me in the last few weeks saying, okay, what's going on? What signal is this sending us?
We think that one of the biggest reasons why the spot price has softened in the last couple of months is we've seen a lot of selling of material in a very thin market as we got close to year-end. We suspect one or possibly two different funds have liquidated their positions in the spot market in the last few months. That has put some pressure on the price. The price seemed to have bottomed out just after Christmas at around $70 a pound. In the last few days, we've rallied back up to $76 as some buyers have reemerged and taken advantage of that dislocation.
It feels to us like it's a temporary dislocation. We think the spot price will strengthen as Q1 begins and buyers return to work. Utilities have been very quiet. We don't yet have the final numbers regarding the term volumes in the spot market. Still, estimates are around £110 million procured, which sounds like a lot of material, but that is way below replacement rate contracting. Once again, if you take out the Chinese contracts that were signed this year, which were quite large, the amount of uranium purchased by the rest of the world looks quite low. That's why we remain very constructive and bullish: all you're doing is kicking that demand down the road. It's all going to be eventually pent-up demand, which is going to support the uranium price.
James Connor: You mentioned 110 million pounds were contracted in 2024. How does that compare to 2023?
John Ciampaglia: In 2023, the number was 160 million pounds, and the industry considers that to be at replacement rate contracting levels. But again, there was a very large one-time contract between the Ukrainians and Westinghouse and Cameco that was about 40 million pounds of that. If you take that out as a non-recurring item, we would argue that the industry has not been at replacement rate contracting for 2 years in a row, even though the uranium supply chain has become much more susceptible to disruption, even though we've had a lot of supply challenges with both brownfield and greenfield.
Our position in the last few years has been that the spot price is going to be volatile in the short term but is going to grind higher. If you look at the average spot price in 2024, it was $86 for the year. The average spot price the year before was $61. That's a pretty good move. Even though we didn't finish strong, the average price last year was meaningfully stronger in 2024 than in 2023.
James Connor: You also mentioned that a couple of funds were selling in late 2024. Can you characterize the type of those funds? Were they hedge funds?
John Ciampaglia: It's hard to confirm, but I think it's widely believed in the marketplace that the Kazakh-based ANU fund, which was set up a couple of years prior, was in the process of being liquidated in 2024. We think that upwards of 2.3 million pounds may have been sold late in the year, and we think that had an impact on the price for sure.
James Connor: The Sprott Physical Uranium Trust, or SPUT, now holds 66 million pounds.
John Ciampaglia: Just over.
James Connor: How many pounds were acquired in 2024?
John Ciampaglia: Last year, we purchased about 3 million pounds. I think we're at 66.2 million pounds right now.
James Connor: I want to ask you about some of the uranium equities now, and once again, we saw a big disparity in terms of price movements. Cameco did well. It was up 30% on the year, give or take, but many other names were down on the year. Where we saw the real moves were in the utility names. Constellation Energy, for example, was up over 100% on the year. Vistra, another big utility name in the U.S., was up over 300%. Do you think a lot of the hedge fund money has moved to these utilities?
John Ciampaglia: I think 12 months ago when the uranium price broke through $100 a pound, we had a lot of transient hedge fund money chasing the trade. I think a lot of that money is gone. The hedge funds that are left in the fund have been in the fund for a number of years and are sticking to their thesis because they're going through the thesis, and they're going through their models and saying, look, nothing's changed. If anything, everything keeps getting better, so if the price goes down, that is not a sell signal. I think we've had some rotation for sure.
As I mentioned, some of that money has gone into the downstream companies that will benefit from this nuclear renaissance that is benefiting from the Inflation Reduction Act. They're benefiting from all of these various big tech deals being signed between utilities and AI-related technology companies, which we never would have anticipated even 12 months ago. I think it's an exciting development in the field because it's going to bring a lot of capital, which is important. I read that Microsoft said they're going to spend $80 billion on their AI data centers in 2025 alone. It's mind-boggling, and that's everything from equipment to land, et cetera.
Suppose you can find the chips, code, people, and land and put these things together. In that case, you need the electricity, and that's why they're focused on sourcing electricity with baseload power attributes and clean sources. I think they focused on renewables, buying renewable energy credits and whatnot as offsets for a long time. Still, they finally concluded that they needed reliable baseload power to match these AI data centers. That's why they're signing these 20-year power purchase agreements with the likes of Constellation Energy at prices way above spot pricing, which tells you how important this electricity piece of the puzzle is for them.
They are going to consume huge amounts of electricity. They are solving their own problem. I love this term: bring your own power. They're going to sign a lot more of these behind-the-meter deals with local utilities, either with existing nuclear power stations like they've done with Constellation or building the next generation of small modular reactors, which we've had a whole flurry of announcements in the last few months around that.
James Connor: You were talking about big tech and their need for additional electricity to power these data centers, but the last nuclear reactor to be built in the U.S. was Vogtle in the state of Georgia. It took over 10 years to construct, and I'm just wondering how realistic it is to think that these data centers are going to be using nuclear energy, especially in the short term.
John Ciampaglia: I think the problem is going to be solved on multiple fronts. You're going to see continued investment in renewable energy, you're going to see natural gas-powered electricity plants helping to offset intermittency, and then finally, you're going to see nuclear energy, both large-scale and small scale providing that backbone of baseload power. You're right; it is a big challenge for the industry because we largely forgot how to build these things for a long time, and we lost those supply chains and that knowledge base of workers. That's why I think China has been so successful in building nuclear power on time and on budget that they just built the same model over and over again. They have incredibly strong efficiencies of scale, and their supply chains are very resilient.
That's something that, unfortunately, the Western world will have to relearn like we did in the 1970s and 80s. I think the exciting part about big tech is the cultural difference that they bring. They are accustomed to being highly innovative and disruptive, much like small modular reactor companies. They're willing to be the ones that are going to finance these first-of-a-kind reactors, which inevitably are going to have some growing pains. Utilities, if you think about them culturally, they're about as polar opposite as you can get from a tech company in an AI race.
This is why I think these deals are so important: they bring the much-needed risk capital, which is missing, into this whole mix. There's some government money that is going to be available as well. The Advance Act in the U.S. provides almost $1 billion of funding. The Loan Program Office is available to companies looking for additional capital. I think it's great that the government is finally starting to step up with some incentives, risk sharing, and big tech, given how deep their pockets are and how willing they are to win this AI race; I think it is really important.
James Connor: John, we can't have a discussion on uranium without talking about the country of Kazakhstan or Kazatomprom, the world's largest producer of uranium. Kazatomprom has been fraught with numerous issues in 2024 which has hampered their production. In addition, recently, Cameco said they had to suspend production at their JV with Kazatomprom due to various issues. I want your thoughts on what this means regarding supply and, ultimately, uranium pricing.
John Ciampaglia: It's incredibly important. We watch Kazatomprom as a producer very closely because they are the world's largest producer. They are one of the lowest-cost producers in the world. Why that's important is because with every commodity cycle, you have price and demand signals, and then you have supply responses. For the last three years or so, we've had very bright positive price and demand signals flashing. So you would expect that in free markets, you would have a commensurate supply response, and that supply response is starting to come. It's coming from a number of companies.
But Kazatomprom is always looked at because of its huge resources of uranium and its ability to bring more to market. We have learned in the last year that they have certain challenges in-country, which will limit their ability to bring meaningful new production to market. That's important because we think having that continued supply discipline, so to speak, is going to prolong the bull market in uranium. If the market is not flooded with material, the price should stay higher for longer. That's why we focus so much on them.
If you take them at their word, they have supply chain issues related to sulfuric acid. Those issues that don't seem to be solvable in the next let's say, three or four years. And between now and then, we might have very limited new production coming from the country. The other important geopolitical factor is where their production goes, mostly to China and Russia. If you look at the huge contracts they're signing with their neighbors, I think it's probably fair to assume that three-quarters of all their production is going to those two countries alone.
That doesn't leave a lot for the rest of the world, and everybody has been trying to diversify risks in terms of geopolitical risks and supply chain risks and whatnot, and the world needs, I think, new sources of uranium that are coming from countries closer to the reactors in the west. Canada is very well positioned, given its huge uranium reserves in the Athabasca Basin. However, these reserves are going to take time to permit, and we know the environmental permitting process is very long. Then, you have to build the mines, which can take several years because of the remote nature of those locations and the complexities of mining in that specific geology.
But we're very optimistic and hopeful that those mines will be built in this cycle because they need to be built. That's when we'll get meaningful new supply. But that's still five or six years away or even longer. If you look at it on an average annual basis, I think that's why the uranium price has kept going up since 2020, when it was essentially stuck. The market is seeing the signals, and the price is responding.
James Connor: What does that mean if you're a Western utility? If you're trying to acquire pounds, where are you going to go if you can't buy it from the world's largest uranium producer?
John Ciampaglia: There's been a number of different geopolitical challenges and operational challenges around the world. We still don't have the situation in Niger solved. That was 4% of global production that's still stuck in the ground. France is obviously scrambling around trying to figure out where to source uranium from now. We've always argued that the uranium supply chain, because it is so concentrated in a few countries and a few companies, is just more vulnerable to disruption, and we've had numerous disruptions since I would say the beginning of 2022 is when the supply chain started to become more unstable. A lot of that was related to the invasion of Ukraine.
We got through the sanctions last year in terms of them finally becoming law and Russia retaliating with a set of their own. I'd say that's a big wild card for 2025: will enriched uranium from Russia flow west again? So far, it hasn't. That could be a bit of a wake-up call to utilities regarding something more pressing to them because that enriched uranium is a lot closer to end use than U308. You can have all the U308 you want in the world, but you're stuck if you can't process it into end-state fuel bundles. Those services are what are stuck right now: that conversion service step and that enrichment step.
James Connor: With all the elements that you just touched on, why haven't the U.S. utilities been more aggressive in acquiring pounds?
John Ciampaglia: I wish I knew the answer. It's a bit of a head-scratcher. For two years now, I thought they would be more aggressive. I would say we've seen some of their European counterparts be more proactive and aggressive in buying uranium under long-term contracts. But for some odd reason that I cannot explain, it seems some U.S. utilities have been dragging their feet. It's not a one-size-fits-all. Some utilities have been proactive and are well covered for this foreseeable future, others less so, and I think those are kind of the stress points in the system.
James Connor: We have a new administration in the U.S., and Chris Wright is going to be the secretary of energy. What are your thoughts?
John Ciampaglia: Anytime you have a change in political party, there's a lot of review of how things are going to change. What will change under a new administration? What's in, what's out? I think it's important to remind everybody that Republican administrations historically have been very pro-nuclear. Ironically, it's been Democratic ones that have not. The last Democratic administration was incredibly pro-nuclear. Most of the major legislation that's been passed in the last few years related to energy was very supportive of nuclear energy, so that, in our mind, isn't going to change. We think Trump is going to be very focused on energy dominance, and that is everything.
It's about additionality, meaning adding a lot of energy, whether it's oil and gas or nuclear. We think it's all about energy dominance, and the incoming secretary of energy is from an oil and gas background and is very well known. But what's interesting and caught our attention is that he's also a board member of Oklo, the Sam Altman-led startup developing small modular reactors. That’s great because he has been educated on the benefits of nuclear energy, small modular reactors, and these next-generation designs, so that's great in terms of getting up the learning curve, and I hope that he and his administration will be just as supportive nuclear energy as the last one was.
James Connor: John, as we wrap up, Sprott produces a lot of resources and research on uranium and nuclear energy. If somebody wants to access that research, where can they go?
John Ciampaglia: We're probably the most prolific in writing and talking about uranium, given that we're the world's largest manager with uranium-related investments. We spend an enormous amount of time following the market and talking about it in all avenues. I encourage you to visit the website. We write a monthly report that's very insightful and gives a good summary of what's going on in the market. We've got a lot of interesting podcast guests from all avenues of the nuclear fuel supply chain and nuclear energy, and they're always entertaining. I learn something every time. I encourage your listeners to visit the website and review our insights and blog section.
James Connor: John, thank you.
John Ciampaglia: Great to be back, and all the best for 2025.
Important Disclosure
Sprott Physical Uranium Trust (the “Trust”) is a closed-end fund established under the laws of the Province of Ontario in Canada. The Trust is generally exposed to the multiple risks that have been identified and described in the prospectus. Please refer to the prospectus for a description of these risks. Relative to other sectors, precious metals and natural resources investments have higher headline risk and are more sensitive to changes in economic data, political or regulatory events, and underlying commodity price fluctuations. Risks related to extraction, storage, and liquidity should also be considered.
The Trust is a closed-end fund managed by Sprott Asset Management LP. Units of the Trust are qualified for sale under a prospectus in Canada
Relative to other sectors, precious metals and natural resources investments have higher headline risk and are more sensitive to changes in economic data, political or regulatory events, and underlying commodity price fluctuations. Risks related to extraction, storage and liquidity should also be considered.
Gold and precious metals are referred to with terms of art like store of value, insurance, ballast, safe haven and safe asset. These terms should not be construed to guarantee any form of investment safety. While “safe” assets like gold, Treasuries, money market funds and cash generally do not carry a high risk of loss relative to other asset classes, any asset may lose value, which may involve the complete loss of invested principal.
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