Jefferies Raises Long-Term Uranium Forecast to $95 on Rising Costs and Supply Risks

Jefferies has significantly raised its long-term forecast for uranium, now projecting a price of $95 per pound, a substantial increase from its previous target of $70. The investment bank argues that escalating production costs and project execution risks mean current price levels are insufficient to finance the new supply required to meet future market demand.

Rationale for the Upgrade

In a note to clients, Jefferies analyst Mitch Ryan stated that uranium continues to benefit from strong geopolitical support for nuclear energy investment. However, the firm believes the economics of bringing new production online have fundamentally changed. Existing producers are reportedly resisting low-priced contracts, while developers need a higher incentive price to move forward.

The report highlights several key cost pressures:

• Major producers have seen unit costs increase by 83% to 184% over the last five years.
• Developers, who are expected to account for roughly 20% of supply between 2026 and 2035, have not yet signed significant contracts.
• Higher capital intensity and increased execution risks have raised the pricing threshold needed to greenlight new projects.

"We revise our forecast price to $95/lb, which reflects the economic conditions required to finance replacement supply," Ryan wrote. The current incentive pricing, while adequate for today's demand, is not enough to secure the long-term pipeline.

Shifting Supply and Demand Dynamics

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Jefferies anticipates primary uranium production will peak in 2033 at 243.4 million pounds before declining. On the demand side, China is expected to be the dominant driver, contributing 74% of the growth in reactor capacity and more than doubling its own demand.

At the same time, the bank forecasts that secondary supplies of uranium will fall significantly as dynamics in the enrichment market reverse. The report identified renewed access to Russian enriched uranium as the primary downside risk to its forecast.

Investment Outlook

Given the market landscape, Jefferies recommends a balanced portfolio approach for exposure to the uranium sector. This strategy aims to diversify individual project execution risks while maintaining flexibility to changing market conditions.

The firm expressed a preference for companies with a blend of current production and longer-term development potential. Specifically, Jefferies highlighted Paladin Energy (PDN) and NexGen Energy (NXE) as its favored stocks in the space.