O N DECEMBER 3RD McIntyre Partnerships, a hedge fund in New York that normally buys equity and debt securities, told investors it was buying a commodity: uranium. This “slight anomaly” was justified by the metal’s impressive recovery, said its founder, Chris McIntyre. Uranium’s spot price has jumped by 41% since April, to near a two-year high (see chart), following an overdue reduction in supply.

Uranium fell out of favour after the Fukushima nuclear disaster in 2011, which led to plant closures in Japan and Germany and a slowdown in plant-building elsewhere. (Uranium, or plutonium, which is made from it, is an essential nuclear fuel.) Despite the recent surge its price, at $29 a pound ($64 per kilo), is still 60% below the 2011 peak, according to U x C , a consultancy. Production costs will be above that for perhaps three-quarters of this year’s output.

Uranium miners were slow to cut supply in response. Most sales were locked in through long-term contracts pre-dating 2011, so the spot price barely mattered to them. Now, however, those contracts are starting to expire; few extend past 2020. Producers “are finally showing some responsibility”, says an executive at one of the largest mining firms.

Kazatomprom, the largest producer, committed to a 20% cut in December. Cameco, a Canadian rival, then said it would mothball the world’s largest uranium mine, in Saskatchewan, reducing global supply by 11%. It is buying on the spot market to fulfil existing contracts. Paladin Energy, an Australian firm, has gone bust. Meanwhile, consumption is creeping up: this year, global nuclear generation finally recovered to pre-Fukushima levels. Supply and demand are once more near to balance. Prices are also buoyed by buy-and-hold vehicles like Uranium Trading, in New York, and Yellow Cake, in London, which are sequestering large amounts. Yellow Cake, which listed five months ago, has seen its initial stash grow in value by over a third. Hedge funds are also coming back. Overall, funds account for 16% of spot-market transactions to date this year. “They’re putting oil on the fire,” says Scott Melbye of Uranium Energy, an American firm. Hedge funds are fickle. In 2007 their entry into the market buoyed uranium to $136 a pound, says Jonathan Hinze of U XC . Their retreat after the financial crisis helped cause a collapse. But the long-term trend seems clear. Global demand is expected to rise by 44% by 2035. China has 19 nuclear reactors under construction and 41 more planned. India is building six and considering another 15. Saudi Arabia is seeking to award its first two projects; Egypt, Jordan, Turkey and the United Arab Emirates have announced programmes. All this will require new mines. If they are to be viable, the spot price will eventually have to rise to $50-60, reckons Andre Liebenberg, Yellow Cake’s boss.

A higher uranium price is not much of a worry for customers. Fuel is a far smaller share of operating costs at nuclear plants than at coal- or gas-fired ones. The bigger concern for importing countries is whether supply is secure. On November 26th, in a sign that China’s government is taking the issue seriously, China National Uranium Corporation, a state-backed firm, bought a Namibian mine, guaranteeing itself 3% of global output. The American administration is considering invoking national security to restrict imports and support domestic production.

Big exporters, like Kazakhstan, which supplies two-fifths of global output, are nonetheless sanguine. Demand for uranium is largely unaffected by price. As it becomes dearer, they should be able to have their yellowcake and eat it.