Why Did the Price of Uranium Skyrocket?

Between 2004 and 2007, the spot price of uranium more than quadrupled, reaching more than $140 before falling off sharply in the past several months to less than $80.

Why was there such a huge spike in price?

One reason is because there’s been an increased demand from nuclear power plants around the world, as nuclear energy becomes more palatable in the face of global warming. (We wrote here about that phenomenon.)

But if you watch this interesting Canadian TV interview, you’ll see that there’s an interesting supply side of the story as well as the demand side.

According to David Miller, C.O.O. of Strathmore Minerals, nuclear plants had, until recently, been living off a huge uranium stockpile from the 1980’s. That stockpile was created in anticipation of an onslaught of new U.S. nuclear plants that ended up never being built because of Jane Fonda political, regulatory, and public pressures. Now, says Miller, with that stockpile depleted, there’s a huge push for new uranium.

This doesn’t explain the recent drop in uranium price, of course, but it is hardly the only commodity that’s taken a hit.

On a broader and more important note, go read the excellent article in today’s Wall Street Journal headlined “New Limits to Growth Revive Malthusian Fears.” It ably wrestles with the recurring fear that the world’s resources and capacities have been outstripped by the number of people living here. Unlike many such articles, it is neither hysterical nor dismissive.


Steve I expect better from you...

"One reason is because there's been an increased demand from nuclear power plants around the world, as nuclear energy becomes more palatable in the face of global warming."

replace "global warming" in the statement above with fossil fuel prices and energy demands...

there is no need to throw in the catch phrase "global warming" in order to make your posting anymore relevant... plus I, like many of your reader, are tired of the unwarrented GW talk anyway.


Yes. A large portion of current demand is filled by inventories that are decreasing. Yes. Demand is increasing. However, supply from production will increase to meet demand and decreasing inventories over the long term. No one knows the exact amount of inventory available for sale such as from the Russian weapons program. Today's prices are more than adequate to provide producers with the profit they require to bring on more production. There will be an over supply of uranium by 2012 or 2013....but then again...that's just my opinion.

Tim Worstall

"Military shells are made from depleted uranium which is not sold on the open market."

Really? I've bought and sold it. But then I am a dealer in odd metals.

One more thing explains the slump (that is the thing that needs explaining, not the current high prices, but the low prices of $8 a lb a few years back).

Post cold war there were a number of plans to turn the nuclar arsenals into fuel for reactors. This involved turning HEU into LEU. There was a lot of it about. Al Gore (in one of the more sensible parts of his political career) was heavily involved in the program to buy Russian HEU and feed it into US and other reactors.

Robert S. Porter

My guess is because the Saskatchewan Party was elected and now Cameco, the worlds largest uranium company which is based in Saskatchewan, is at ease and has increased production.


The reason for the run-up is due to the world's insatiable appetite for energy.
This will be the reason Uranium will continue its upward move. Even if you do not believe in Hubberts Peak oil theory. All oil analysts will agree that all the "CHEAP" oil has been pumped. There may still be a lot of oil on the planet but it is VERY expensive to extract.

As we enter the ENERGY- CRISIS era, we will enter the age of switching from burning Fossil fuels to metal fuels. It is inevitable.

Countries and large corporations will start to hoard oil reserves. Nuclear energy is the only answer, solar/ wind will play a growing but minimal role.

The world is searching for alternatives to $100-200 OIL, first bio-fuels/ ethanol (ridiculous , stupid idea) , today they want to burn as much coal as possible. We all know what burning coal does to the environment. Even if you do not believe in global warming, everyone can agree the damage burning dirty coal does to the environment.

There is currently a huge disparity between supply and demand. There are approx 38+ rectors coming on stream in the near future, 90+ in the pipeline and another 200 being planned to be built by 2020. These numbers are increases as we speak.

What do you think the BIG OIL/ Utilities CO/ Sovereign Wealth funds will be buying very soon. Correction,... they are already accumulating.

A Uranium buying PANIC is enevitable.


Scott K

I'd say that T Gaston may be partly right. The uranium market is complicated, though. There is also the issue of secondary sources... there are primary sources which consist of uranium actually being mined, but there are also secondary sources (which have composed a larger percentage of the market recently, but will go down in the future as they dry up and additional production capability comes on line). Such sources include surplus uranium released from US and Russian Federation inventories from the Cold War era. These secondary sources are quite sensitive to political uncertainities.

T. Gaston

You are uninformed but your comments are interesting.

Military shells are made from depleted uranium which is not sold on the open market.


Could it have to do with the U.S. troops in Iraq using up a lot of and then replenishing depleted uranium rounds, which are used to blow up armored vehicles, bunkers and the like?

Since the war no longer features tank battles, the demand for uranium rounds has gone down.


AlexW -
Interesting question. I assume you're referring to previous price hike, not the current price drop.

My initial (and admittedly uninformed) assumption is that there many of the entities that would like to use uranium in weapons can summon vast quantities of money. Also, the success of the strategy of pricing some entities out of the weapons game depends on whether those entities are concerned with protecting their long-term economic interests. There are extremists who I'm sure are quite content with the possibility of dying in order to carry out an attack on others - as long as uranium is still acquirable, I wouldn't imagine that such people care about its cost. On the other hand, I have a hunch that most, if not all, of those in a position to fund/orchestrate an attack (as opposed to the minions that simply carry it out) are seriously interested in not dying and hence will not want to bankrupt themselves in the process of acquiring the uranium.


T Gaston

Uranium prices increased because of a near term panic caused by a new term shortfall in supply. The shortfall was caused by several events in the industry occuring at the same time. Hedge funds saw an opporunity to make money so they purchased a large quantity of the available supply which caused the price to spike at $138.00. The price decreased because the short term demand was filled. Prices will continue to decrease as hedge funds take thier profits and move on to other ventures. There is adequate supply to meet demand over the long term so price will settled at the incremental cost of production which should be about $60.00-$65.00/lb...but then...that's just my opinion.


I second the point raised in the initial comment. I do not dispute that the earth's temperatures are changing (as they've done for, oh, forever). But there is a world of difference between factual shifts in temperature, and the media-fueled phenomenon of "global warming." "Global warming" is a deceptively simplistic term, and its use imports a whole lot of misconceptions, commonly ignored uncertainties, and (irrational) emotional assumptions.

It is irresponsible to throw around the term "global warming" as is done in the post. Find some other way to attract the attention of the masses. And if environmental concerns or changing conditions are in fact relevant, explain specifically how they are (or provide references). "Global warming" alone is misleading and tells us nothing - except perhaps that you don't actually know what you're talking about.

Erin K.

When governments regulate prices to such extreme levels (on par with making them entirely illegal, almost), the black market for said commodity will grow. The only way that this could work is if you had a universal agreement from *every* uranium company in the private sector to set prices equally--which is illegal in the first place--and entirely defeats the point of a free market, where competition for prices will lead to profit. Set prices high, either by private or government methods, and watch the energy costs in areas that get power from nuclear plants skyrocket, therefore defeating the whole purpose of having a nuclear plant in the first place, and leading to an excess of uranium with no buyers, making it even *more* accessible for the black market.

And, those who would sacrifice essential liberties (even economic liberties) for increased safety deserve neither liberty nor safety.


a student of Economics

"nuclear plants had, until recently, been living off a huge uranium stockpile from the 1980's....Now, says Miller, with that stockpile depleted, there's a huge push for new uranium"

That's not rational economic behavior. Why would anyone sell or use the stockpiled uranium at the old lower price if they knew it was going to be gone soon and the price would then skyrocket? Rational behavior would be to hang on to it for later sale or use, which would automatically raise the short term price and lower the long term price so there would be no abrupt price shock. To be precise, arbitrage conditions for a storable, finite asset lead to its price steadily, smoothly increasing at the real interest rate (plus any storage costs).

You need some sort of change in information, external shock, or irrationality to make your story work.

A Nonny Mouse

As someone who used to trade futures and options for a living, I'm surprised that nobody has commented on the obvious: In addition to the supply-demand issues described above and below (which cannot account for anything like the price movements we've been seeing in themselves), commodity price spikes are driven much more by emotion than economic fundamentals. Supply and demand will push prices upward or downward, but it takes a heaping helping of fear to make them move as far and fast as they have. That's where rational markets devolve into rationalistic markets, whether at peaks or troughs. Any price theory which fails to account for the social psychology of market participants simply fails.

George Bell - CEO UNOR, Inc.


As the CEO of the Canadian uranium exploration company UNOR, Inc - 19.5% owned by the largest uranium producer in the world, Cameco - I feel it necessary to help clear the air on this issue.

First, there are two components to the uranium process: The long-term price and the spot price. When enrichers and reactors run into a near-term supply crunch, they must go to the spot market. However, most enrichment facilities and reactor end users buy at long term prices.

Over the past few years, both the spot and long-term prices have run dramatically from the supply - and demand - issues within the nuclear world. See: http://www.uranium.info/prices/longterm.html

On the supply side, last year mine production only accounted for 55% of the world's uranium consumption. The remaining 45% came from secondary sources, including decommissioned nuclear warheads.

On the demand side, there are presently 439 reactors operating in the world today... But here's what's interesting: There are another 34 being built, 93 planned, and another 222 proposed. The demand for U308 (uranium oxide, what the spot and long-term prices reflect) is surging with the world's push for carbon free energy sources. See: http://www.world-nuclear.org/info/reactors.html

Once, nuclear power was frowned upon; however, while many American politicians refuse to acknowledge the true need for it, especially with today's economic and geopolitical issues, due mostly to elevated oil prices.

Even the founder of Greenpeace now publicly supports nuclear power. On April 16, 2006, Patrick Moore publicly endorsed nuclear power in the Washington Post. He stated, "Thirty years on, my views have changed, and the rest of the environmental movement needs to update its views, too, because nuclear energy may just be the energy source that can save our planet from another possible disaster: catastrophic climate change."

The simple fact of the matter is, those who are educated understand the benefits of nuclear power, which is part of the reason for the global surge in demand. There are some credulous minds who cannot possibly comprehend the fact that technology has made nuclear a safe, carbon free, low cost energy source, but that will never change.

I shudder when I hear public outcry about nuclear waste... Most people don't even know that the byproduct from coal-energy plants "fly ash", otherwise known as "coal ash" is 100 times more radioactive than that of waste from nuclear plants. And coal energy plants are extremely plentiful in America, almost right smack dab in the backyards of many citizens.

Before I get too sidetracked though, let's get back to the issue of long-term prices versus that of short-term spot prices.

Here's specifically how spot and long-term prices differ.

Spot prices are the most risky markets to buy in, as they hold all of the volatility of "now." When short-term supply drops dramatically, spot prices jump through the roof. However, when short-term supply increases, spot prices fall. Spot values are shortsighted prices for buyers and sellers with minimal timeframes.

Long-term prices; however, are generally higher than spot prices, as they entail more risk for both buyer and seller. When a buyer locks in a long-term price, the delivery of uranium will take place two (or more) years out. The buyer would lose, if the long-term price were to fall when delivery actually took place; conversely, the seller, if prices were to rise dramatically.

The spot price of uranium has been falling over the past few months, but this is because most buyers are locking in at the long-term price, which is presently $95 per pound of U308. Behind the smokescreen, savvy insiders know that that the spot price is falling, because no one is buying at the spot price. Really, industry insiders know, enrichers and reactors are buying at the long-term price, because they know the price is going up, based on supply/demand issues alone.

The spot price will reflect such in the future, but for now, it is sort of a "smoke and mirrors" as to what is really happening within the industry.

George Bell
CEO and Chairman: UNOR, INC.



Could a possible counter-terror measure be to make Uranium so exorbitantly expensive that to use it in a weapon is just not worth it?


I read an article in 2004 about the very same theoretical supply issue and went out and bought some stock in a Canadian uranium company, so it's not exactly a new story.


Hmmm, this is starting to smell like oil, you know what I mean?

J. Saleh

The reason Uranium prices rose is because Iran wanted to buy a stockpile and ended up paying more than the quadruple you mentioned- from the Russian blackmailers. The reason it decreased is because Iran finally got the Uranium delivered, when Puten needed money to stay in power, and after many many people got rich on bribes. So now there is no reason for the price to stay up. Not so freaky. Just human behavior mr. Dubner. In the future just look to see what Iran wants and then watch as the price goes up.


Saskatchewan is planning to pursue not only increased production of uranium from ore, but also will try to convince the G8 nations to amend their policy to allow the province to enrich it.

With regard to depleted uranium a primary use is for tank armor. http://www.inl.gov/featurestories/2007-02-20.shtml

As for the run up in price, just calculate the first fuel load requirements of all the new nuclear plants on the drawing boards, and you'll see why there is increased demand for uranium. For that matter, neither Louisiana Energy Service nor Areva would be betting $2 billion each to construction uranium enrichment plants in the U.S. with full operations set for 2012.