Joe Reagor of ROTH Capital Partners explains the two factors that have kept uranium spot prices down, how much longer they will be in effect, and why uranium should be on investors' radar screens today. He also discusses four uranium companies that are in position to benefit from the looming uranium shortage. Many analysts, including Reagor, believed that the uranium price recovery was going to happen in 2014. Then when 2014 did not happen, he thought 2015. Then when 2015 did not happen, he said 2016. Now in 2016, and uranium is back under $28/pound ($28/lb) again. The recovery is not happening. There are two parts to why he does not see a spot uranium recovery. First is the uranium spot market has been rather tight in terms of overall percentage of production, and there have been some nuclear plant closures in addition to shutdowns in Japan after Fukushima.
Add to that a lot of production growth already build into pipelines that has come on-line and ramping up production and creating a larger amount of spot uranium to be sold into a weak market. Cameco Corp. Cigar Lake is an example of that. So this creates extra pressure on the spot market, but if you look at contract pricing, it has remained relatively stronger, in the low $40s. Producers are making decisions based on the contract price, not the current spot price. So there is a disconnect between spot and contract pricing. The other reason he is not seeing a spot uranium recovery is Fukushima had a longer and more lasting impact on the overall market than he thought was possible. The restarts in Japan have been slow, but that is just one country in the overall puzzle. Other countries have looked at Fukushima as a reason to change regulations, which has stalled the development of additional reactors. China, for example, had a three-year hiatus from allowing any nuclear reactor project to be developed, as it rewrote its regulations. Read on for extensive discussion ...
Working URL: https://seekingalpha.com/article/3973397-will-uranium-emerge-shadow-fukushima
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