Guosen: The natural uranium cycle is approaching, and long-term contract prices have more guiding significance.

Guosen released a research report stating that the marginal change in nuclear power is imminent, and uranium demand is expected to increase significantly. Influenced by the dual drivers of civilian nuclear power and military attributes, the primary supply gap for uranium is expanding year by year, with some secondary supply shifting to secondary demand. Currently, there is a significant mismatch in natural uranium reserves, production, and nuclear power plant capacity, leading to supply instability and potential shortages. As of mid-December, the long-term contract price is $81.5 per pound, while the spot price is $75 per pound, with the long-term contract price being more indicative. Guosen's main points are as follows: Uranium demand: driven by both civilian nuclear power and military attributes. The marginal change in nuclear power is imminent, and uranium demand is expected to increase significantly. According to data from the World Nuclear Association, as of December 2024, global nuclear power grid capacity is 396GW, with 439 grid-connected nuclear power plants and 71.8GW of capacity under construction with 66 nuclear power plants. According to OurWorldinData, global nuclear power generation accounted for 9.11% in 2023. It is estimated that considering the construction period of nuclear power plants, uranium demand will accelerate in 2027, with the first loading possibly requiring earlier demand. According to WNA data, global uranium demand in 2024 is 67,517 tons, with China accounting for 13,132 tons. It is projected that by 2030, global and Chinese grid capacities will reach 495GW and 92GW respectively, with demand reaching 84,084 tons and 18,384 tons respectively, and with a CAGR from 2024-2030 of 3.7% and 5.8% respectively. China will become a major driver of global uranium demand. Additionally, tech giants such as Microsoft, Google, and Oracle are investing in nuclear energy, where nuclear power will support AI development. Furthermore, geopolitical conflicts are escalating, and the military attributes of uranium cannot be ignored. Uranium supply: the primary supply gap is expanding, and some secondary supply is becoming secondary demand. Starting from 2026, the primary supply gap will expand year by year. In 2026, the primary supply gap for uranium is 1,427 tons, and it is expected to increase year by year from 2027-2030 to 3,083 / 6,166 / 8,269 / 10,443 tons of uranium. From 2014 to 2020, the price of uranium continued to decline, slowing down the progress of many uranium exploration and development projects, with overall related expenditures of various countries decreasing from $21.2 billion in 2014 to $2.5 billion in 2020, representing an 89% decrease; this slightly increased to $2.8 billion in 2021 globally, there are limited incremental and highly certain mines. Kazakhstan has resolved sulfuric acid issues, and its production capacity utilization rate has climbed, releasing an increment of 6,000 tons. Canada's McArthur River is at full production, releasing an increment of 2,300 tons; Namibia's Langer Heinrich has resumed production, releasing an increment of 2,000 tons; the Honeymoon uranium mine has resumed production, releasing approximately 1,000 tons; Assuming Uzbekistan can achieve its goal of producing 7,100 tons of uranium by 2030, it will add an average annual production of 400 tons of uranium. The Dasa uranium mine in Niger, when fully operational, will contribute an increment of 1,500 tons. Secondary supply supplements the primary supply and demand gap and is declining. Government inventories are decreasing; commercial inventory peaks are falling, and some commercial inventories are driven by financial institution investment demand, shifting from supply to demand; SWU capacity shifts from surplus to scarcity, underfeeding supply shifts to overfeeding supply, and secondary supply shifts to secondary demand. Supply-demand balance: a mismatch in supply and demand, natural uranium transitioning to scarcity. There is a significant mismatch in natural uranium reserves, production, and nuclear power plant capacity, leading to supply instability; coupled with limited primary supply increments, secondary supply is shifting to secondary demand, creating a contradictory uranium supply-demand pattern. It is anticipated that 2029 will be the year when the supply-demand balance shifts to tension, at which point secondary supply will no longer effectively supplement the primary supply gap. Taking into account the structural shortages caused by the restrictions imposed by the United States and the European Union on Russian natural uranium, as well as the demand brought about by earlier loadings, shortages may occur ahead of schedule. Price and catalysts: As of mid-December, the long-term contract price is $81.5 per pound, and the spot price is $75 per pound, with the long-term contract price being more indicative. On the supply side, with limited primary supply increments, operating mines often have production guidance downgrades (such as Kazakhstan's production plans and when McArthur Lake will reach full production), frequent mine disruptions (a political coup in Niger resulting in the shutdown of one mine, and the recovery of two mining rights), structural imbalances (a ban on Russian uranium in the US by 2028), and declining secondary supply each year. Under these conditions, low capital expenditures over the past decade imply that most future resource additions will come from current investments, and the long investment cycle means that a scarcity five years later will be sufficient to support high prices and even further increases. On the demand side, countries are gradually implementing nuclear power plans, with Japan restarting 16GW of nuclear power units, countries such as the US and France launching a triple nuclear energy agreement at COP28, and China planning to double the share of nuclear power generation by 2030; in addition, commercial investment demand is expected to continue expanding in a low interest rate environment. The core catalysts for future prices include the unexpected landing of nuclear power plants in various countries due to tech giants' nuclear energy investments, production guidance downgrades in mines, escalating geopolitical conflicts causing a supply-demand imbalance, increased commercial purchases, and other factors. Risk warnings: Uranium exploration progress exceeds expectations; risks of excessive inventory releases; nuclear power grid integration delays; large-scale application of fourth-generation nuclear power technology.