When it comes to investing in commodities, investors have many options choose from. One of those options is uranium.

But before for going down the route of investing in the energy metal, it is perhaps worth understanding some of the basics that make uranium an important commodity in our day-to-day lives.

What is uranium?

Uranium is a fairly common metal, and occurs in most rocks in low concentrations of 2 to 4 parts per million. It even occurs in water. This makes it even more common than gold. The metal was discovered in 1789 by Martin Klaproth, a German chemist, in a mineral called pitchblende and was named after the planet Uranus, which had been discovered several years prior.

Uranium, when refined, is a silvery white metal that is weakly reactive. It does, however, react with most non-metal elements and their compounds, except noble gases. The metal’s reactive properties increase with temperature.

Naturally occurring uranium is found in two different isotopes: uranium-238 (U-238) which accounts for 99.3 percent of uranium occurrences or uranium-235 (U-235) which makes up the remaining 0.7 percent of uranium instances.

Of these two isotopes, U-235 is the most important. U-235 is the uranium isotope most commonly used in nuclear fuel. This is because is U-235 is fissile, meaning that under certain conditions the isotope can be split, creating a significant amount of energy.

Unlike U-235, U-238 is not fissile, but it is fertile. Meaning that it can capture one of the neutrons flying around in the core of a reactor, creating plutonium-239. Plutonium-239 behaves very much lie U-238, in so far that it is fissile and gives off significant amounts of energy.

Uses of uranium

The most significant use of uranium today is in nuclear power generation. The first commercial nuclear power stations started operating in the 1950s. Today there are over 400 commercial nuclear power reactors in operation, providing more than 10 percent of the world’s electricity without carbon emissions.

Uranium also finds use in the military sector, particularly in high-density penetrators. This ammunition uses depleted uranium alloyed with one or two percent of other metals like titanium or molybdenum. Depleted uranium is also used to harden armor on military vehicles.

Probably the most prevalent use of uranium in military applications is weaponry, more specifically, nuclear bombs. This was one of the first uses of uranium before electricity and radioisotopes. However, since the 1990s, most of the military uranium has been repurposed for electricity generating purposes.

Radioactive isotopes are also an important use of uranium. With a foothold in medical, industrial, and agricultural sectors, radioisotopes play a bigger role in our lives than we may realize.

Why uranium?

With a growing global population undergoing continuous urbanization, the need to turn on, and keep on the lights is more important than ever. It is expected that by 2030, electricity consumption will have doubled from their 2007 levels with a significant portion of that stemming from nuclear power. Today, there are some 439 nuclear reactors in operation, 66 under construction, 158 planned and a further 330 proposed across 31 countries.

What makes uranium a good investment case are the supply and demand fundamentals associated with the anticipated increase in future power generation. China alone has committed to adding 40 nuclear reactors to its fleet by 2020. Likewise, Russia and India have 25 and 24 reactors, respectively, in the planned stage.

However, with such high hopes for the future of nuclear power, there is currently not enough supply available in order to meet the demands of the utilities. This is a supply shortfall that analysts have been heralding for several years. With it, analysts expect to see a sharp increase in spot and long term prices, once the utilities start trying to fill their supply chain for future electricity needs.

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