Most uranium that the US nuclear power industry uses is sourced abroad in unstable regimes. With uranium prices so low, US uranium miners can’t stay in business. The same problem applies for rare earth metals, and other critical minerals.

This is something that few people pay attention to, but it has major implications for the American economy, and way of life. If the uranium supply was cutoff, a large portion of the population would suddenly be without power indefinitely. If we couldn’t access rare earth metals, we would have difficulty manufacturing electronics. There is almost nothing in the modern economy that doesn’t depend on a steady source of power, and a steady supply of constantly upgrading electronics. The US Department of the Interior has warned about this vulnerability.

The US uranium industry consists of a few small, beleaguered miners.  Several of them are sitting on potentially excellent assets, although with prices so low, they might not be able to develop them.  Of course in a worst case scenario, more than just their stock prices is at stake.  Energy Fuels Inc (UUUU) is one of America’s largest uranium producers in the US has been lobbying for the domestic uranium industry. As they point out, the US has a serious national security risk. Consequently, they have been lobbying the US government to improve the situation.  Energy Fuels Inc. made several good points in a recent press release:

The current global health crisis has revealed the nation’s Achilles heel of dependency on foreign sources for critical materials. America’s reliance on crucial medicines and supplies from adversarial nations such as China has sounded the alarm for U.S. policy makers to think and plan smarter. The current crisis has also shown that the U.S. has a dangerous reliance on certain foreign sources of critical minerals and energy. Most people know about the country’s extreme reliance on China for REEs, which are found in products as varied as cell phones, electric vehicles, wind turbines and military systems that defend America. Not as many people know that the country is now nearly 100% reliant on imports of uranium for its nuclear power plants. If nothing changes, over 50% of this uranium and nuclear fuel may come from state-owned entities in Russia, Kazakhstan, Uzbekistan, and China in just a few years.

Covid-19 was a catalyst that no one predicted, but it has been an important force driving the uranium market this year.  Longer term, the American experience during the  pandemic has important implications.   As the pandemic broke out,  American hospitals were unable to source a lot of basic personal protective equipment.  They key lesson is that America cannot rely on foreign suppliers for critical goods.  If there is geopolitical turmoil,  supply chains will break down.   Countries will have export bans.   Therefore, the US shouldn’t be entirely reliant on foreign sources of uranium.   

The press release included a custom infographic. Here is the most interesting part for uranium investors:

American Solutions

Given President Trump’s preference for things “made in America” its likely he will do something to fix this situation. When he does US based uranium producers will soar. There are a few ways Trump could remedy the situation. One is to build up a strategic stockpile by purchasing only from US suppliers. This would be ideal for a uranium investor with a global portfolio. Another option would be to put heavy tariffs on foreign uranium. This would be good for US based miners. Canadian and other foreign miners will probably do just fine selling to emerging markets. One risk of this approach is that it might not be possible for the US to produce enough uranium. A possible compromise is to put tariffs on all foreign uranium other than that from Canada. Or alternatively, the US could restrict purchases from state owned enterprises.

Either way, the covid-19 pandemic has taught the US an important lesson. As more focus is placed on “critical” goods, uranium will come to more people’s attention. The shape of the uranium market will be influenced heavily by geopolitics in the coming years.