MEDIA RELEASE: Nuclear power will play a critical role in the future energy transition, given the increasing importance of energy security as well as positive structural market fundamentals, says Phillip Hudak, co-portfolio manager, Australian small companies, at Maple-Brown Abbott.

He believes the world is entering the next nuclear renaissance and the tide has turned in uranium.

“We are seeing industry fundamentals for nuclear power improving at a rapid pace, with increasing policy support from governments, a re-contracting cycle by western utilities, and a supply side not yet incentivised to significantly increase production – all of which sets the stage for a positive medium-term outlook for nuclear power and, in particular, uranium demand.

“Given the global focus on green energy initiatives, we believe nuclear power has a significant role to play in the future energy mix.

“Nuclear power delivers minimal carbon emissions, in addition to being a reliable source of base-load power to complement renewable energy sources, including solar and wind, making it an attractive option in the current environment.

“In addition, public support for nuclear continues to grow as people directly experience the reality of disrupted and expensive forms of electricity supply, particularly following the Russian invasion of Ukraine which is driving a desire for greater energy security.”

Mr Hudak says that 2022 was a watershed year in the political landscape supporting nuclear energy.

“Given the increasing need for energy security, we saw the US, Europe, Japan and Korea all introducing initiatives that support nuclear as green energy. In Australia we have even seen the re-emergence of the nuclear debate.

“This has resulted in uranium demand increasing in the short-term given the reversal of early nuclear plant retirements and geopolitical tensions, coupled with a strong medium-term outlook given the global focus on clean energy, new reactor builds and development of small modular reactors.

“We believe we're at the start of a term contracting cycle with utilities holding significant uncovered stock positions. There are signs so far this calendar year that long-term contracting levels are starting to approach replacement levels with upside risk to utilities building new inventories.

“We see significant medium-term value upside for the uranium sector, with companies restarting projects expected to benefit most in the short-term.

“We expect a step-change in the uranium term price to incentivise new project developments over the medium-term with a potential price in excess of US$80/lb due to marginal production costs and project cost inflation,” Mr Hudak says.