The suspension of operations at the world’s largest uranium mine in February and major output cutbacks from the biggest national producer have sparked a recovery in the market for the radioactive metal.

“We are now seeing an accelerated rebalancing of the uranium market fundamentals that will provide the basis for a sustained and substantial uranium market recovery,” says Scott Melbye, executive vice president of U.S. producer Uranium Energy (ticker: UEC).

Weekly spot prices for uranium have climbed by 11.6% for the year so far to $26.50 on Sept. 3, from $23.75 on Dec. 25, 2017, according to nuclear-fuel consultancy Ux Consulting.

The key price “drivers have been the reduction in supply and the increase in demand,” says Jonathan Hinze, president of Ux Consulting.

A temporary suspension of uranium production at Cameco’s (CCJ) McArthur River mine in Canada, the world’s biggest, that began in February has since been extended for an “indeterminate duration.” That follows a late 2017 announcement that Kazakhstan’s Kazatomprom would cut uranium output by 20% over three years. Kazakhstan is the world’s top producing country.

The industry had gone through what Joseph Reagor, managing director and senior research analyst at Roth Capital Partners, refers to as a “reluctance to accept reality.” Since 2011, uranium producers “have been reluctant to make the necessary production cuts to balance the supply and demand,” he says.

A massive earthquake on March 11, 2011, in Japan led to a nuclear disaster, the world’s worst in a quarter-century, at the Fukushima Daiichi power plant. That reduced demand. All of Japan’s nuclear facilities were eventually shut down, and none of the country’s nuclear units came back on-line until 2015.

“While nuclear growth slowed following Fukushima, global production expanded at an accelerated rate, incentivized by a previous period of higher uranium prices,” Melbye says. As prices fell to about $20 a pound, around “95% of global production found itself ‘under water,’ ” with production costs exceeding spot and long-term prices. The result has been substantial reduction in global uranium production, he says, with output expected to decline to 135 million pounds this year, from a global peak at 161 million in 2016, he says.

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