A leveraged play on Uranium funds and miner stocks seems to be a catching trend as the 2014 expiration date for the Highly Enriched Uranium Agreement [HEU] comes close.Last year events saw American derivatives of Cameco Corporation (a large cap Uranium Miner stock) growing up by7 % in the gone year and simultaneously being outperformed by the peers like Uranium ETF URA that appreciated 10 % in 2012.
This deficit may be clearly understood through the supply and demand figures from United States of America which houses 104 under operation nuclear power reactors. The reactors collectively produced only 4mllb of Uranium in 2012, while consuming 55mllb during the same year.
The good news is that a laggard supply is not affecting the demand which is constantly growing. Uranium commodity price has been in a crash mode since the failure of the reactor located in Fukushima, Japan leading to a world-wide apprehension towards nuclear energy as a staple power resource. With time the acceptance is regaining ground and the world demand for energy is on the rise. In order to meet this scenario the supply needs to be uplifted manifold. But with other countries too making an exit (or procrastinating their plans for expansion in this field) from the nuclear power and its associated reactors, the above vision seems to be on the back burner.In China 28 nuclear reactors are under construction. The changing picture in Japan displays the reversal of the anti-nuclear attitude by the new president's (Mr.Shinzo Abe) positive stance on building new safer nuclear reactors in the country.
Then there are the emerging nations such as India, China, South Korea and the likes of Russia that are introducing themselves to the nuclear industry by bringing in nuclear reactors.There are 62 new reactors being built in the world.The International Atomic Energy Agency has a very positive prediction which reads as follows- the nuclear power production will rise between 35% - 100% in 20 years. Simultaneously the Uranium demand will rise 60% in the aforesaid time frame. The world nuclear demand will exceed the supply by the year 2014 as estimated by The World Nuclear Association.
Securities like Cameco Corporation and Paladin Energy will be the direct beneficiaries in an improved sentiment scenario. Cameco which accounts for 16% of world's production from its mines in Canada, United States and Kazakhstan also owns foremost land positions in areas promising new discoveries in Canada and Australia.
Amid the positivity there are few glitches that can be discussed such that another disaster similar to the one mentioned above could create havoc for this industry, secondly there are chances that the world demand could grow at a slower pace than projected and the other alternate energy sources of natural gas and solar power might work out to be cheaper and more abundantly available, but more than the analysis, it is the simple law of demand and supply that may make the yellow cake and its related products a probable game changer for 2014.
"H.E.U is a trade understanding that accounted for 24 million of the total 177 millions of global demand in 2012 and allows Uranium extraction from the old Soviet weapons and war-heads. This treaty stands for dissolution thus creating a huge gap between the metal's supply and demand figures. Capital Markets over the world, have been gradually discounting this production aberration to enhance their stock prices, which saw a recent frenzy not more than three months ago. Current market figures that more or less indicate a certain bottoming out of Uranium Mining Fund are compelling investors to take a closer look at pure play broader market products like index bound Uranium ETFs that use a wide spectrum approach while acquiring industry specific assets."
The Global X Uranium ETF [URA] follows the performance of the Solactive Global Uranium Indexand delivers after an annual expense of 0.69%. A basket methodology that the URA fund managers use while stock picking, empowers investors to a global exposure among the top players of the Uranium Industry and at the same time downsizes any individual risks. Cameco Corp., Paladin Energy Ltd and Uranium One Inc. are the top three holdings and account for more than 45% of the total assets of Global X URA.