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Have We Reached An Inflection Point With Uranium Prices?

Nov. 21, 2017 10:34 PM ETCCJ, URA, URPTF, CCO:CA21 Comments
Objective Response profile picture
Objective Response
239 Followers

Summary

  • Uranium investors have welcomed recent production cuts from Cameco and Kazatomprom.
  • The ever-increasing construction of nuclear reactors will cause demand to keep rising.
  • Political climate is the most favorable to uranium producers, since at least the Bush Administration.
  • Both Uranium Participation Corp. and Global X Uranium ETF are compelling ways to create exposure to the uranium market.

Introduction

Uranium has been one of the more controversial and important commodities in the last 10 years. Scientifically speaking, this element has the highest atomic weight of the primordially occurring elements. The primary uses of uranium are in nuclear power plants and developing nuclear weapons. One kilogram of uranium-235 (the only naturally occurring fissile isotope) can theoretically produce about 20 trillion joules of energy, as much energy as 1500 tonnes of coal.

As with other commodities, an important factor contributing to price behavior for uranium is the balance of supply and demand. This commodity had a huge run-up in mid-2000s, crashing during the financial crisis and heading lower after the Fukushima disaster in 2011. Since the accident, the price of uranium has plummeted by around 70%.

Source: Cameco

One of the biggest catalysts for the price decline was the closure of nuclear power plants, which lowered the demand for uranium. After Fukushima, the shut-down of Japan’s nuclear power industry eliminated 13% from global uranium demand.

In the last few years, many analysts have called for the bottom, but to no avail. Certain events in the last year, however, have signaled for the uranium price to stabilize. There are now major reasons why bull market should be around the corner.

We believe that we are now at the turning point for uranium. This article will provide reasons for our bullish sentiment by outlining recent developments, discussing the industry outlook and investment opportunities.

Supply

Earlier this month, uranium investors have been gifted with one of the most positive catalysts in recent memory. Cameco (CCJ) (the world's largest publicly traded uranium company) surprised the market with an announcement that the company will suspend production of uranium from McArthur River and Key Lake Operations. Tim Gitzel said:

With the continued state of oversupply in

This article was written by

Objective Response profile picture
239 Followers
Covering the Healthcare industry (esp. Pharma & Biotech) for the last 6 years. Outside of Healthcare, also explore other industries as well macro trends to find attractive investment opportunities

Analyst’s Disclosure: I am/we are long URPTF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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SymbolLast Price% Chg
CCJ--
Cameco Corporation
URA--
Global X Uranium ETF
URPTF--
Uranium Participation Corporation
CCO:CA--
Cameco Corporation

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