By Jinjoo Lee

Despite the Trump administration's promise to " unleash commercial nuclear power," uranium-related investments have had a rough start to the year. Tariffs and unpredictable geopolitical moves are causing more uncertainty in the market, even if long-term fundamentals look solid.

The spot price of triuranium octoxide has declined about 12% year to date, according to UxC. This has also dragged down the performance of funds such as the Sprott Physical Uranium Trust, which holds the commodity, by 19%. Canadian uranium miner Cameco's shares are down 17% so far this year, while the Sprott Uranium Miners ETF is down 14%.

Uranium-related investments rode the coattails of artificial-intelligence enthusiasm last year as tech companies eyed nuclear options to power their data centers. But these uranium plays fell on the same DeepSeek headlines that threw all AI-related stocks into a tailspin. More recently, Trump's back-and-forth messaging on tariffs targeting Canada and his unconventional approach to Russia and Ukraine have added more uncertainty.

Canada is the largest supplier of uranium to the U.S., accounting for about a quarter of total American utilities' purchases, while Russia is typically America's largest provider of enrichment services, a necessary step for making fuel out of uranium, according to the U.S. Energy Information Administration.

Tariff uncertainty has sidelined purchases by U.S. utilities, according to a recent report from Sprott. Uranium from Canada falls under the 10% tariff rate for energy products -- at least for now. American utilities will probably end up paying that price. Nuclear power plants can't do without uranium, and domestic production typically only fills about 5% or less of U.S. utilities' demand. Cameco, the biggest Canadian supplier, has said its contracts include a clause that passes tariff costs on to the customer.

On the other hand, Trump's push for a Russia-Ukraine cease-fire deal is introducing the possibility that more Russia-enriched uranium could become available in the U.S. and Western Europe. The U.S. last year passed a law that places an import ban on uranium from Russia. So far, the U.S. has granted enough waivers to keep the material flowing, according to Jonathan Hinze, president of UxC, a market-data firm. Those waivers are set to expire at the end of 2027, which means an eventual end to all Russian uranium imports absent some kind of peace deal that leads to a policy change.

Despite policy uncertainties, nuclear plant owners will eventually have to buy fuel supplies. In any case, the cost of fuel is a relatively small portion of a nuclear power plant's operating costs, and the World Nuclear Association estimates that uranium prices would have to rise above $100 a pound for a while to have a considerable impact on operating costs. The spot price peaked above $100 a pound in early 2024, but is now around $63.45 a pound.

For its part, Constellation Energy -- the operator of the largest fleet of U.S. nuclear plants -- estimates that it will spend about $2 billion in 2025 and 2026 to secure nuclear fuel, according to its most recent annual filing. Long-term uranium prices, which form the basis of utilities' contracts, have actually been rising steadily over the last four years and averaged about $80 a pound in February, up 6.7% from a year earlier, and surpassing spot prices.

Guy Keller, portfolio manager of a nuclear-energy sector fund at Tribeca Investment Partners, said that sector specialists try to ignore the spot price because more than 95% of the real trading in uranium happens in long-term contracts. Spot prices are a lot noisier because most of the annual reported spot volume is the same material being churned between a small group of traders, he said.

Even without the highly anticipated nuclear-energy boom from AI power demands, industry observers see enough demand drivers to support uranium prices over the long term. In its downside scenario, RBC estimated that uranium demand would still rise 25% by 2040 compared with 2025 based on new reactor construction plans that are already in place, as well as demand from existing power plants. China alone has 32 gigawatts worth of nuclear-power plants under construction, about a third of America's total operating nuclear-power capacity, according to data from the World Nuclear Association.

Meanwhile, there are risks that supply might not be able to catch up -- in both the near and long term. Hinze noted that more uranium supply from Kazakhstan -- the world's largest uranium producer -- is being kept for Russia and China, leaving less for the U.S. and Western Europe.

Supply out of Kazakhstan was already constrained because of limited sulfuric acid availability for mining; RBC analysts don't see the shortage easing until at least 2027. Much of the production forecast over the next decade is to come from projects that have yet to be constructed or permitted, or from regions with significant geopolitical risk such as Kazakhstan, Niger and Russia, RBC noted, estimating that uranium prices may have to rise to $100 a pound post-2035 to encourage new production.

So while spot prices for uranium may be reactive to daily tariff and AI headlines, long-term fundamentals for the industry are less so. The sector's selloff could be a tempting entry point for uranium bulls that don't mind a bit of volatility.

Write to Jinjoo Lee at jinjoo.lee@wsj.com

(END) Dow Jones Newswires

March 19, 2025 05:30 ET (09:30 GMT)

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