MW How Trump's second presidency could fuel nuclear energy and uranium demand
By Myra P. Saefong
The president-elect's pick for energy secretary hints at his plans for nuclear power
If Donald Trump's first term as president of the United States provided a good representation of how he views the nuclear market, his second term is likely to support further growth in the sector and demand for the uranium used to fuel its reactors.
"The fundamentals behind the supply and demand of uranium have never been more bullish," said Scott Melbye, executive vice president at uranium-mining company Uranium Energy Corp. (UEC)
"Nuclear generation and uranium demand are now on track to double over the next 20 years," said Melbye, who's also chief executive officer of Uranium Royalty Corp. (UROY), which provides investors with exposure to uranium prices by making investments in uranium interests.
In a report released in September, the International Atomic Energy Agency upwardly revised its annual projections for the expansion of nuclear power for a fourth successive year. World nuclear capacity may increase by 2.5 times the current capacity by 2050, it said.
Despite his support of fossil fuels, President-elect Trump may end up being supportive of nuclear power - not so much because it's a clean energy source, but because of his goal, as he pledged during his campaign, to "bring Americans the lowest-cost energy and electricity on Earth."
At a rally in York, Pa., on Aug. 19 that was streamed live on Fox News and posted on YouTube, Trump said he will "do rapid approvals for new energy infrastructure, and we will embrace all forms of energy, including nuclear."
Since Trump's win was announced, however, there hasn't been a big impact on the uranium market, said Jonathan Hinze, president at UxC, a nuclear-fuel market information and analysis firm.
He pointed out that major nuclear utility stocks are generally down since the Nov. 5 election. For example, shares of NextEra Energy Inc. $(NEE)$ and Constellation Energy Corp. $(CEG.UK)$, as of Monday, traded lower than they did on Election Day.
At the moment, it doesn't feel like investors are seeing the Trump victory as a major win for the nuclear industry or uranium, but "time will tell," said Hinze.
Energy secretary nominee
Trump's nomination of Christopher Wright - the founder and chief executive of oilfield-services company Liberty Energy Inc. $(LBRT)$ - as U.S. energy secretary not only furthers his support for fossil fuels, but for nuclear energy as well.
Wright is also on the board of directors of Oklo Inc. (OKLO), a maker of nuclear-fission reactors that also recycles used uranium from other plants. Shares of Liberty Energy and Oklo both closed higher on Monday.
In a statement, Wright said he is "deeply honored" by his selection and plans to work to bring "affordable, reliable energy to the citizens of the United States and beyond."
Liberty Energy, which did not respond to a MarketWatch request for further comment, said Monday in a press release that Wright will continue, for now, in his current role as company chairman and chief executive. But if Wright is confirmed by the Senate, Liberty Energy President Ron Gusek will become CEO, while Lead Director William Kimble will become nonexecutive chairman.
Wright is a "strong pick" for the Energy Department, according to Melbye. "Given the transgressions committed on the oil-and-gas industry [by the] Biden administration, it was expected the top role would go to someone from an oil-and-gas background," he said, adding that the so-called war on fossil fuels likely "ends on day one of the Trump administration."
Shortly after becoming president in January 2021, Biden signed an executive order banning new oil and natural-gas leasing on federal lands. Yet under his presidency, U.S. domestic oil production has climbed to a record high.
Melbye also said he likes that Wright is "supportive of nuclear" given that he serves on the board of Oklo.
The National Resources Defense Council on Monday, however, pointed out that Wright has been known to deny the impacts of climate change and has advocated for greater use of fossil fuels.
"Putting a champion of dirty fossil fuels in as the leader of the [Energy Department] would be a disastrous mistake," Jackie Wong, senior vice president for climate and energy at NRDC, said in a statement.
Support for nuclear energy
Despite Trump's well-known slogan of "drill, baby, drill," in support of fossil-fuel production, he was also very supportive of nuclear power in his first term as president, said Melbye.
In a memorandum issued July 12, 2019, then-President Trump established the United States Nuclear Fuel Working Group, which would examine the current state of domestic nuclear-fuel production and "reinvigorate the entire nuclear-fuel supply chain." At the time, Trump also said the country's uranium industry "faces significant challenges in producing uranium domestically and that this is an issue of national security."
And on Jan. 12, 2021, Trump issued an executive order promoting small modular reactors for national defense and space exploration. In it, he said that "nuclear energy is critical to United States national security."
During Trump's 2024 presidential campaign, he said he would support nuclear-energy production by modernizing the Nuclear Regulatory Commission, working to keep existing power plants open and investing in innovative small modular reactors.
At the August rally in Pennsylvania, Trump noted that the electricity demands of artificial intelligence and cryptocurrencies are a "very big subject" and that development in the nuclear space would help meet those needs.
"We have to stay at the top. We want to be right at the forefront, otherwise China and other countries will take it over. That's both of them: AI and crypto," Trump said. Given that, "we will make a historic commitment to bring in advanced, small, modular nuclear reactors online." These can be built "ultra safe" and they're "ultra clean, and they're very low cost."
Trump's second administration is determined to achieve American energy dominance, which "means that we will again produce so much power that we are not only energy independent, but also have the ability to export energy to friends and allies in Europe and Asia," said Melbye.
"The war on fossil fuels will end on day one, which will be necessary if natural gas and nuclear are to provide the baseload for a grid that faces profound increases in demand from an ever more electrified technology society" that includes electric vehicles and data centers, said Melbye. He added that he sees "nuclear and natural gas to be complementary heavy lifters in this pro-energy policy."
Read: AI and crypto use lots of energy. Nuclear power and uranium look like the perfect fix.
In addition, Microsoft Corp. $(MSFT)$, Google parent Alphabet Inc. $(GOOGL)$ $(GOOG)$ and Amazon.com Inc. $(AMZN)$ have all announced plans to utilize nuclear power to fuel the "voracious energy demands" of their data centers and artificial-intelligence ambitions, spurring significant demand for uranium and nuclear infrastructure, noted Taylor Krystkowiak, vice president and investment strategist at Themes ETFs.
'In short, the current political composition of Washington appears to remain supportive of nuclear energy across the board.'Taylor Krystkowiak, Themes ETFs
And Republicans, despite voicing opposition to many of the green-energy initiatives of the outgoing Democratic administration, have "carved out an exception for nuclear, he said. "In short, the current political composition of Washington appears to remain supportive of nuclear energy across the board."
Mixed messages
Still, there are "clearly some competing trends when it comes to Trump and nuclear power," said UxC's Hinze.
He agreed that Trump was generally supportive of the nuclear industry in his first administration, but the policies enacted under President Joe Biden have focused on combatting climate change - and those have been "much more impactful in promoting nuclear power in the U.S. and internationally than anything we saw under Trump before."
If the new Trump administration removes many of these climate policies, it could be "negative overall for nuclear power," said Hinze. If Trump emphasizes fossil fuels, that could "indirectly stall some nuclear projects, as utilities may be hesitant to push on nuclear as hard as before."
He added, however, that Republicans are "overall pro-nuclear," so it would be hard to see a Republican congress go along with Trump if he decides to fully remove current policies like tax credits, loan guarantees and cost-sharing programs that are aimed at promoting nuclear power.
All in all, whether Trump's actions will be supportive of the nuclear power industry is "still an open question, [and] we'll have to keep watching to see what the new administration focuses on," Hinze said.
Outlook
Looking ahead, Hinze said there "continues to be a lot of opportunity for nuclear power - but this is not a fast-moving market."
It takes a long time to develop new reactors, new uranium mines and fuel-cycle facilities, so most investors focused on nuclear energy and uranium must take a long-term view, he said.
The big issue right now is the relationship between the U.S. and Russia related to the enriched uranium trade, noted Hinze. On Friday, Russia announced temporary export restrictions on enriched uranium to the U.S., in a move that appears to be in response to a U.S. ban on Russian uranium products after 2027, S&P Global Commodity Insights reported Friday.
Uranium prices traded as low as $76.50 a pound just a few weeks ago. Thanks to the Russia news, prices are now close to $83.
"If more clarity emerges on what the Russia export ban looks like, we could see further upward pressure on prices," Hinze said. And if more utilities enter the contract market in the coming months to buy uranium, that could add further upward pressure on prices, he added.
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November 19, 2024 07:00 ET (12:00 GMT)
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