Huayuan Securities: Natural uranium becomes a key resource in the AI era, global nuclear power revival uranium mining prosperity reversal.

Huayuan Securities released a research report stating that the lack of electricity for AI has led cloud companies to actively layout nuclear power assets. The new round of nuclear power revival has driven the demand for natural uranium to become a key resource in the AI era. Currently, the global nuclear power industry has entered a high boom cycle, with expected levels comparable to the oil crisis of the seventies and eighties, leading to a steady increase in the demand for natural uranium. As the supply of natural uranium is highly concentrated, with limited primary supply increments and gradual decline in secondary supply, the medium to long-term supply-demand gap may widen, pushing the central price of natural uranium upwards. Recommending focusing on uranium mining leaders that benefit from the long-term price increase cycle and flexible assets that benefit from domestic nuclear fuel construction in the United States. Huayuan Securities' main points are as follows: The lack of electricity for AI has led cloud companies to actively layout nuclear power assets, driving strong demand for natural uranium in the new wave of nuclear power revival. Under the AI wave, the tightening of U.S. electricity supply has led cloud companies to favor nuclear power. According to JLL, by the end of 2023, the scale of under-construction data centers in the United States will reach 5.3GW, with a planned scale of 22.2GW under construction. According to CEG, by 2022, the power demand of data centers in the United States accounts for about 2.5% of the total power demand, which is expected to rise to 6.5% to 7.5% by 2030. However, the slow growth of U.S. power supply and the increase in the proportion of renewable energy have caused a decline in power supply stability, gradually increasing the risk of power shortage. Based on its stable and reliable nature, as well as its low carbon environmental characteristics, nuclear power is favored by cloud companies. Microsoft and Amazon pay a significant premium for stable nuclear power supply. In September 2024, Microsoft signed a 20-year power purchase agreement with CEG, purchasing energy from the updated factory at a price of about $114/MWh, significantly higher than the current level of nuclear power prices. The global nuclear power industry has entered a high boom cycle, presenting levels comparable to the oil crisis of the seventies and eighties, leading to a steady increase in the demand for natural uranium. According to WNA data, the current global installed capacity of nuclear power is 396GW, corresponding to an annual demand for about 67,500tU of uranium. In the COP28 conference in 2023, 22 countries signed the Triple Nuclear Energy Declaration for 2050. According to neutral forecasts by WNA, the global installed capacity of nuclear power will reach 686GWe by 2040, with an average annual addition of about 18GW from 2025 to 2040. The global demand for reactor uranium is expected to increase to 129,900tU by 2040. The natural uranium industry has a high concentration, with relatively scarce low-cost uranium mining resources. The total uranium resources are sufficient to support long-term use of nuclear power. According to NEA, uranium resources with mining costs below $260/kgU can be used for 130 years, while those with costs below $80/kgU can only be used for about 30 years. Uranium mines with costs below $40/kgU account for less than 10% of the world's total recoverable resources, and low-cost uranium mines mainly come from Kazakhstan. The concentration of uranium production is also very high, with global uranium production of 49,400 tons in 2022, of which Kazakhstan accounts for 43%, and the top five uranium-producing countries account for about 85% of the total production. Limited primary supply increments, gradual decline in secondary supply. In terms of new primary supply, due to stagnation in uranium exploration since 2015, the landing of new mines in the short to medium term is relatively limited, and mine restarts are the main source of supply growth in the short term. In the medium to long term, existing mines face retirement pressures. Secondary supply has dominated in the past, but due to insufficient long-term primary supply, secondary supply has gradually declined. The medium to long-term supply-demand gap may widen. All three sectors may face supply shortages in the future. 1) Natural uranium sector: In the short term, natural uranium maintains a tight supply-demand balance, with potential geopolitical shocks possibly leading to supply imbalances. The medium to long-term supply-demand gap may widen. 2) Uranium conversion sector: According to WNA forecasts, global production capacity has been unable to meet current demand, and by 2040, the gap may reach about 30,000 tons of uranium. 3) Uranium enrichment sector: In the short term, there may be oversupply but regional imbalances, with production capacity mainly concentrated in Russia. Geopolitical shocks may lead to supply shortages in European and American countries. Five factors driving the central price of natural uranium upwards. 1) Natural uranium accounts for about 10% of the total cost of nuclear power, while electricity accounts for about 20% of the total cost of AI cloud business, making downstream sensitivity to uranium price increases very low. 2) The adjustment of mining taxes in Kazakhstan, the main supplier of natural uranium, increases costs while limiting supply increments. 3) Geopolitical factors causing supply-demand imbalances, as the U.S. enforces restrictions on low-enriched uranium imports from Russia and strengthens domestic low-enriched uranium production capacity, may lead to short-term supply shortages of local uranium enrichment. 4) A wave of long-term agreements, rising spot prices driving further long-term agreement price increases, which in turn provide support for spot prices. 5) SMRs (small modular reactors) significantly increasing the unit consumption of natural uranium, driving medium to long-term demand for natural uranium. Target analysis: Focusing on four main themes, it is recommended to pay attention to uranium mining leaders benefiting from the long-term price increase cycle, as well as flexible assets benefiting from domestic nuclear fuel construction in the United States. Theme one: Kazakhstan accounts for over 40% of global natural uranium production, with KAP mainly selling to China and Russia. In the future, Western countries may face a shortage of uranium supply, and U.S. domestic companies are expected to enjoy high growth premiums. It is recommended to focus on UUUU, UEC. Theme two: In recent years, the United States has been continuously advancing the construction of its domestic nuclear fuel supply chain, with uranium enrichment as a core component. By 2028, the U.S. aims to fully restrict the import of low-enriched uranium from Russia, making LEU a core beneficiary in the medium to long term. Theme three: As the relationship between uranium supply and demand changes in the medium to long term, escalating long-term and spot uranium prices drive up the actual selling prices of uranium mining leaders like U3O8, leading to increased unit profits. It is recommended to focus on CCJ, KAP. Theme four: Spot prices have greater volatility than long-term agreement prices. It is recommended to pay attention to price-sensitive varieties like SPUT, YCA. For long-term investors optimistic about the prospects of the uranium industry and global nuclear energy demand growth, it is recommended to focus on URA. Risk warning: Nuclear power revival falls short of expectations, uranium mine restarts exceed expectations, and production by leading companies exceeds expectations.