After inching upward from a midsummer low of about $28/pound, the uranium spot price appears to have finally found a toehold, and has surged upward to the $40/lb range in recent days. Notably, experts scrutinizing the space suspect the recent gains are durable.
The uranium spot price received a major boost when approval to restart two nuclear reactors at the Sendai power plant in Japan was announced on Nov. 7. All nuclear reactors in Japan were shut down following the earthquake and Fukushima nuclear disasters in 2011. The two Sendai reactors are expected to come online in early 2015.
But even more significant, according to analyst David Talbot of Dundee Capital Markets, is the fact that utilities have begun purchasing U3O8.
"The thing that might make this sustainable is that the utilities are starting to buy, in addition to the intermediaries and financial entities that are buying," Talbot wrote in a Trade Idea on Nov. 7. "Trading is still thin, but the makeup of the bidders has changed a lot recently and sellers are getting less needy to sell. The utilities need to purchase both spot and term uranium, and cover for 2017-18 period in particular."
H.C. Wainwright analyst Jeffrey Wright, as quoted on StreetInsider.com on Nov. 11, "thinks uranium spot prices could rise above $50/lb in the next twelve months," with the restart of the Japanese nuclear plants acting to "alleviate psychological pressures on the uranium market."
In addition to the boost from utilities and the news from Japan, Jeb Handwerger, writing on Nov. 7 in Gold Stock Trades, noted, "The Republicans had a huge victory taking control of Congress and this could give a boost to nuclear power. The Democrats blocked funding for Yucca Mountain, a nuclear waste site. Now the Republicans can push forward a pro-nuclear agenda."
