Uranium Is Hot And Could Get Even Hotter

Uranium Is Hot And Could Get Even Hotter
Reda Farran, CFA

about 1 month ago2 mins

Mentioned in story

Uranium has seen an explosive rally in the past three years, with its price more than tripling and blasting to a 16-year high. And that strength isn’t likely to fade anytime soon, especially now that Kazatomprom, the world’s biggest producer of the radioactive material, is warning about supply shortfalls in the coming two years. The Kazakhstan-based miner, which accounts for more than a fifth of global output, recently warned that its production this year would miss expectations because of shortages of sulphuric acid – a crucial component in extracting uranium from ore. And it said its production targets for 2025 might also take a hit.

The shortfalls will only compound the existing mismatch between uranium supply and demand. The metal’s blistering rally over the past few years mainly comes down to the simple fact that there’s less of it around and demand’s been growing. See, governments are looking to build new nuclear plants to reduce their reliance on fossil fuels and secure greater energy independence – particularly after Russia’s invasion of Ukraine. As a plus, nuclear power is considered a clean energy source, which might help countries reach their emissions targets and explains why the World Nuclear Association recently upped its forecasts for global nuclear power use.

The problem is that uranium supplies are tight: mining tapered off over a decade ago because people got spooked after the Fukushima nuclear disaster in Japan in 2011. So there were fewer new mining projects approved and less of the stuff pulled from the ground overall. A recent coup in Niger, a major uranium producer, and mining production challenges in Canada have also squeezed supply. So these new output warnings from the world’s biggest producer of the metal are unwelcome news. There’s no quick fix here: uranium projects take a long time to start, so the market will probably be tight for some time.

And that’s all worth noting: uranium was one of the top-performing commodities last year, and with all those factors, it may well continue that hot streak. What’s more, it could potentially inject some fresh diversification to your portfolio, since it doesn’t tend to rise and fall in tandem with stocks or bonds. For a fast-growing, pure-play uranium stock ETF, check out the Sprott Uranium Miners ETF (URNM; 0.83%), which has a pretty chunky $1.9 billion in assets and tracks about 40 uranium miners worldwide.

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