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Ultimate Guide to the Section 232 Uranium Tariffs

06.19.2019 | Ben Phillips, CFA

Uranium Tariffs Investment Report Blog

The EventShares Policy Playbook series is a group of concise, client-friendly research reports highlighting key policy investment themes. Each Playbook covers background of the policy, U.S. industries and companies impacted, and the emerging opportunity. 


The Section 232 Uranium Tariffs Playbook provides an in-depth overview of the policy, the size of the market opportunity, the investment case and timing. Download the full PDF to read the entire report.


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Policy Overview: What's Happening?


The Trump administration has asked the Department of Commerce to conduct a Section 232 study on the U.S. uranium market. Uranium is used to generate electricity via nuclear energy, which supplies ~20% of U.S. electricity. More than 90% of the U.S. annual uranium demand is met from imports from foreign countries, such as Russia and Kazakhstan. The Trump administration believes the shares of U.S. energy generated via nuclear and the reliance on uranium imports could pose a national security threat and energy crisis is geopolitical tensions increase.



The Numbers: Size of the Opportunity


  • 20% - Percentage of U.S. electricity generated by nuclear power
  • 93% - Amount of domestic uranium consumption imported from foreign countries during 2017
  • 50 - Number of nuclear reactors under construction globally



Our Take: The Investment Case


Nuclear power generation relies on uranium as a key input. In a normal uranium market, utilities sign long-term contracts at fixed prices to cover their projected uranium demand. The long-term contract cycles often run more than a decade because utilities want to ensure their uranium supply is uninterrupted. The uranium market is approaching another cycle during which utilities are expected to sign long-term contracts in order to meet their uranium demands over the next decade.

The Trump administration's Section 232 study has disrupted the uranium market. The proposed remedies, import quotas and tariffs, are causing utilities to delay signing long-term contracts. The utilities don't want to sign a long-term contract on today's pricing assumptions and later be subject to quotas and tariffs on their contracts. Instead, utilities are content to run out their contracts and purchase their uncontracted uranium demand in the spot market. Purchasing uranium in the spot market would normally cause the spot price of uranium to increase, which would incentivize utilities to sign long-term contracts. However, the uranium mining industry is emerging from a cyclical low due to an oversupplied market.

In our view, the spot price of uranium is artificially low. The combination of proposed quotas/tariffs and oversupply of uranium are dis-incentivizing utilities from signing long-term contracts. We believe the uranium market will begin to function normally and the spot price of uranium will increase after the result of the Section 232 study is released, which will increase the value of uranium mining companies.



Timing: Significant Actions Taken & Next Steps


The Department of Commerce submitted its Section 232 report to the Trump administration on April 14, 2019. The Trump administration now has 90 days to act on the report, which means the final decision on uranium tariffs and quotas should be released by mid-summer.

Congress has also taken steps to support the U.S. nuclear industry. The Nuclear Energy Innovation Capabilities Act (NEICA), which directs the Department of Energy to prioritize partnerships with private innovators to test advance nuclear react concepts, passed in September 2018. The Nuclear Energy Innovation & Modernization Act (NEIMA) passed the House with a bipartisan 361-10 vote during December 2018. NEIMA imposes a cap of the Nuclear Regulatory Commission's annual fees for existing nuclear reactors, which could lead to increased nuclear reactor development.


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