Goldman Sachs: Uranium's Structural Deficit Makes the Miners a "Buy"

As recently as 2023, nuclear power was seen as a fringe idea, and the uranium miners were on virtually no one’s radar screens.

What a difference a couple of years can make. Nuclear is now leading the energy transition, and Wall Street is predicting a multi-decade boom for the miners.

Consider this from Goldman Sachs:

Is nuclear power set for a revival?

(Goldman Sachs) - After decades of stagnation, the supply of nuclear energy is poised to increase significantly in the coming years on the back of rising power consumption, a shift toward cleaner energy, and the need for round-the-clock power sources, according to Goldman Sachs Research.

By 2040, global nuclear generating capacity is expected to rise from 378 gigawatts to 575 gigawatts, representing an increase in nuclear energy’s share of the global electricity mix from around 9% to 12%. A growing number of countries are backing a pledge to triple nuclear energy capacity by 2050, write Goldman Sachs Research analysts Brian Lee and Carly Davenport.

The expected increase in generating capacity coincides with a surge in support for nuclear power globally and a spike in investment in nuclear power facilities. The total nuclear fleet of around 440 reactors today is set to expand to roughly 500 by 2030, and well over 400 additional reactors are in the planning or proposal stage, according to the World Nuclear Association.

Nuclear energy “has become a key area of focus globally as countries revisit the technology after many years of underinvestment,” write Lee and Davenport.

Is nuclear energy becoming popular again?

Since the first commercial nuclear reactor was launched in 1954, support for nuclear energy has ebbed and flowed as perceptions of the power source’s safety and reliability have shifted.

At its peak in the 1980s, nuclear power represented around 17% of the total global electricity generation mix, but its share began to wane after the Chernobyl disaster in 1986. After the Fukushima disaster in Japan in 2011, nuclear power dropped to roughly 9% of global electricity supply and has remained at about that level ever since.

The world’s nuclear reactor fleet has been aging rapidly due to underinvestment and a lack of interest in the technology. After decades of underinvestment, the median nuclear reactor is around 32 years old.

Now, however, conditions appear to be primed for the construction of nuclear power plants to accelerate. In May, President Donald Trump signed executive orders to accelerate nuclear adoption in the US. By lowering regulatory and cost barriers to entry and providing funding for nuclear plants, the orders target an expansion of nuclear power in the US from around 100 GW today to 400 GW by 2050.

Meanwhile, China plans to build 150 nuclear reactors over the next 15 years, with the target of reaching 200 GW of nuclear power by 2035, according to China’s 14th Five-Year-Plan.

And at the most recent COP29 climate summit in November 2024, 31 countries pledged to triple the world's global nuclear generation by 2050, alongside 140 nuclear industry companies and 14 large financial institutions.

Why is nuclear energy growing?

Global investment in nuclear power generation grew at a compound annual growth rate of 14% between 2020 and 2024, following almost five years of no growth in spending.

“This has come on the heels of improving policy support globally, underscored by the growing demand for power and less emission-intensive alternatives in a world that is retiring coal plants at a rate much faster than it is building new ones,” Lee and Davenport write.

Used fuel from nuclear reactors is highly radioactive, and needs to be processed, recycled, or safely disposed of. However, nuclear reactors produce almost no greenhouse gas emissions, so are often considered a clean energy source. They are also a form of baseload power, meaning that they run reliably all hours of day and night. On the other hand, renewables like solar, wind, and hydroelectric power are intermittent, generating varying amounts of energy depending on the time of day, the season, and the weather.

There are currently 61 nuclear reactors under construction across 15 different countries, with roughly half of them located in China. Lee and Davenport’s report points out that 59 of those are scheduled to come online in or before 2032.

In addition, there are roughly 85 reactors planned across the globe, with another 359 proposed. “While we do not anticipate all of these planned and proposed reactors to come online, we think this statistic is still noteworthy in highlighting the level of activity in the industry,” our analysts write.

New technologies are also set to boost nuclear power generation capacity. As investment in nuclear energy has started to pick up globally, countries are allocating money not only to large nuclear reactors but also to newer variants such as small modular reactors (SMRs). SMRs are a fraction of the size of a larger nuclear power plant, and they’re comprised of standardized components that can be mass-produced in traditional facilities and shipped to the site, unlike traditional reactors which are built on-site with larger components. SMRs typically have a lower power generation capacity (between 20-300 megawatts, compared to around 1GW for traditional nuclear reactors). But SMRs are also generally cheaper to build, and once their design is fully standardized, they should generate electricity more cheaply throughout their lifetime than larger traditional reactors. Goldman Sachs Research projects that the levelized cost of electricity for the average SMR could be less than $100/megawatt-hour, whereas traditional reactors typically see levelized cost of electricity in the region of $125/MWh.

“This represents a largely greenfield growth opportunity for the sector as currently there are only two licensed, approved, and operating small modular reactors and one test reactor operating across the globe,” Lee and Davenport write.

But with SMR technology still years away from deploying at scale, the team’s forecasts for nuclear generation are largely driven by life extensions for existing reactors, inoperable reactors being restarted, and new traditional reactors coming online. They estimate that by 2040, nuclear generating capacity will grow by around 200GW.

The demand for uranium is set to increase

Nuclear reactors need fuel in the form of uranium oxide. The raw material must be mined, milled, purified, and then enriched to obtain the radioactive isotope of uranium that creates energy when it’s split.

By modelling the fuel needs of every reactor globally (as well as plants under construction and some planned reactors) and tracking existing and planned uranium mines, our analysts have created a forecast for uranium supply and demand until 2045.

As more plants come online and the lives of existing reactors are extended, the team sees uranium demand growing in the coming years. They estimate that in 2024, uranium oxide demand was roughly 90,000 tons globally. “We expect annual reactor requirements to increase to around 164,000 tons by 2045, and this does not account for secondary demand from utilities buying to stockpile inventories, governments, or individual purchasers,” Lee and Davenport write in the report.

On the other hand, uranium production is set to increase from its current 80,000 tons to nearly 95,000 tons in 2030, before eventually declining to around 60,000 tons by 2045. In aggregate, the team is forecasting a uranium supply deficit of roughly 17,500 tons by 2030. “We anticipate this deficit to grow to roughly 100,000 tons by 2045 as new reactors come online,” write Lee and Davenport.

This structural deficit is likely to cause uranium prices to rise. This, in turn, could drive up the price of nuclear uranium mining stocks.

Find this Substack’s recommended uranium stocks here.