Will the shelling of the Zaporizhzhya Nuclear Power Plant threaten the uranium market?

The war between Ukraine and Russia has been the main topic in the media in recent weeks, and the conflict does not seem to be abating. Russia is violating the provisions of international law by bombing civilian objects, and the Russian army is behaving irresponsibly in the vicinity of nuclear power stations, of which there are a total of four on Ukrainian territory. 

The uranium producers' market is extremely sensitive to any information related to potential contamination and misuse of nuclear energy. In the past, the disaster at the Fukushima power plant caused by the tsunami and earthquake led to a collapse in uranium prices and a decline in sentiment towards nuclear energy. As a result, the shares of the raw material producers have fallen and most of them are not yet close to the peaks of 2007-2011. The Russian army has already endangered the Ukrainian nuclear power plants twice by military intervention, first at Chernobyl where plant workers were taken hostage and yesterday by shelling the largest nuclear power plant in Europe, the Zaporizhzhya Nuclear Power Plant in Enerhodar.

However, the shelling was probably not serious and is not continuing. Ukrainian and Polish scientists have so far reported that no increase in radiation has been observed and there is no risk of an environmental disaster around Enerhodar. It is also worth mentioning that nuclear power plants are built to withstand artillery fire without any problem, and some facilities are secured in such a way that they can operate without the risk of contamination or serious failure even if hit by a passenger plane at full power. Special material protection is used for this.

The International Atomic Energy Agency spoke about the shelling of the plant, stating that there was no risk of contamination and that all reactors were working properly. This information was provided by its head, Rafael Grossi, who went on a special mission to Ukraine to carry out technical inspections of the power stations there. Both Ukraine and Russia have agreed to the inspections.

Despite this, the shares of uranium producers Kazatomprom (KAZ.UK), Cameco (CCJ.US) Uranium Energy Corp (UEC.US), Denison Mines (DNN.US) or Nexgen (NXE.US) are falling today amid growing concerns over the safety of Ukraine's power plants. 

The U.S. Geological Survey (USGS) removed uranium from its list of strategic commodities, stating that fuel materials could not be on the list. If this list had been respected by the Department of Energy (DOE) it would have been an undoubted problem for raw material producers. In the meantime, however, the DOE announced the very next day that it was in the process of creating its own list of strategic raw materials. At the same time, Department of Energy (DOE) spokesman Ramzey Smith reported that uranium is being considered and consultations between the parties are currently underway. The DOE is in the process of establishing a national uranium reserve. It is being funded by the US Congress to eliminate the political risk associated with the availability of uranium (Kazatomprom, Kazakhstan, remains the world's main supplier).

The DOE report shows support for further nuclear energy development in the US. Aaron Mintzes director of policy at Earthworks told E&E News that after reading the DOE report, "it's hard not to conclude that department officials want to declare uranium 'critical' again "

At the same time, the situation in Ukraine appears to be under control and contamination is not occurring, scientists have confirmed. Uranium is likely to be given the status of a strategic raw material in the USA, helping the States to become independent from the Kazakh raw material producer and having a positive impact on the activities of Canadian and US companies supplying fuel to power plants. In the meantime, however, investors remain cautious.

Location of nuclear power plants in Ukraine. Source: Wikipedia

Besides specific companies, it is also worth looking at ETFs like URA.US, ETF CFD. Despite negative moods, the upward trend prevails since 2020. Also price remains well below recent highs. Source: xStation5