Uranium remains one of the most important raw materials in the global energy system because of its central role in nuclear power generation. As countries look for reliable sources of low-carbon electricity, nuclear energy continues to support long-term demand for the fuel used to operate reactors.
Uranium is a naturally occurring radioactive element found in small amounts in rock, soil and water. It is best known as the primary fuel used in many nuclear power plants, where its properties allow large amounts of energy to be produced from relatively small quantities of material.
Before uranium can be used as nuclear fuel, it passes through several stages of processing. The material is first extracted from uranium-bearing deposits and converted into uranium oxide concentrate. It can then undergo further processing and enrichment before being manufactured into fuel suitable for use in commercial reactors.
Natural uranium consists mainly of uranium-238, while uranium-235 makes up a much smaller proportion. Most commercial nuclear reactors use low enriched uranium containing around 3% to 5% uranium-235. This specialised fuel cycle creates an established industrial market that extends from mining and processing through to enrichment and fuel production.
The long operating lives of nuclear power plants also make uranium demand different from many shorter-term commodity markets. Once a reactor begins operating, it requires a continuing supply of fuel over many years. New nuclear construction can therefore contribute to additional long-term demand as reactors enter service.
The expansion of nuclear generating capacity has increased attention on the availability of uranium and the ability of the mining industry to respond. Developing new uranium resources can take many years, particularly when projects must progress through exploration, permitting, financing and construction before commercial production begins.
Existing production can become more strategically relevant when new supply requires long development periods. At the same time, stronger market conditions can encourage additional exploration, mine development and investment across the wider nuclear fuel industry.
Uranium also benefits from the broader characteristics of nuclear power. Nuclear plants can generate electricity continuously and produce power with low direct carbon emissions. These qualities have helped maintain nuclear energy as part of the electricity mix in a number of markets and have renewed interest in the fuel supply required to support it.
Geiger Counter Limited (LON:GCL) is a Jersey closed-end investment company, which invests in uranium exploration and production stocks.
