Dennis Berzhanin summarizes:
1. Uranium investors have welcomed recent production cuts from Cameco and Kazatomprom.
2. The ever-increasing construction of nuclear reactors will cause demand to keep rising.
3. Political climate is the most favorable to uranium producers, since at least the Bush Administration.
4. Both Uranium Participation Corp. and Global X Uranium ETF are compelling ways to create exposure to the uranium market.
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 1,500 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%. 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.
Earlier this month, uranium investors have been gifted with one of the most positive catalysts in recent memory. Cameco (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 the uranium market and no expectation of change on the immediate horizon, it does not make economic sense for us to continue producing at McArthur River and Key Lake when we are holding a large inventory, or paying dividends out of proportion with our earnings. The impact of this announcement is huge because it drastically reduces the supply of uranium. McArthur River is the world's largest uranium mine. Its closure will take 12% of global supplies off the market, significantly reducing the gap between production and demand.
This wasn't the first major reduction in the global production of uranium. Back in January of this year, Kazatomprom, Kazakhstan's state uranium producer, announced a 10% reduction in production for 2017, taking off 3% of the global market. As a country, Kazakhstan is an undisputed leader in production, accounting for 41% of uranium in the world. The major contraction in the supply of uranium is clearly a strong bullish signal for uranium, but what about demand?
Original URLs: https://seekingalpha.com/article/4127022-reached-inflection-point-uranium-prices?page=2
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