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General Market Commentary
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General Energy
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General Market Commentary
Uranium: Huge Market Opportunity with a Wildcard
For several years, there has been a growing chorus in the mining industry that the next bull market for the uranium sector was (is) overdue. That chorus is now reaching a crescendo, and it’s based upon supply/demand parameters that are stark and unequivocal.
Adding additional complexity and opportunity to this equation is a major political “wildcard”. More on that later.
Massive supply/demand imbalance
On the demand side, there are currently more nuclear reactors in operation globally than at any other time. But the real story with uranium demand is the future growth in the nuclear industry that has already been telegraphed.
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Even if all of these plans/proposals don’t come to fruition, the nuclear industry is projecting to double in size – by as early as 2030. Those demand parameters alone are enough to get the attention of any serious mining investor. However, the supply side of this equation is equally significant.
As the nuclear industry is entering an unprecedented growth phase, supply isn’t growing along with this. In fact, the mine supply of uranium has been shrinking. It’s not only marginal uranium operations that have been coming off line.
Some of the largest (and highest-grade) mines for some of the world’s largest uranium producers have been mothballed in recent years. Perhaps the highest profile announcement in this respect was Cameco’s closure of its huge McArthur River/Key Lake uranium mine – one of the world’s highest-grade uranium operations, that took effect in January 2018. Restarting production in these operations is neither fast nor cheap.
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Uranium demand is high and projected to increase dramatically. Supply is falling because prices are so low that some of the world’s most robust uranium operations are unable to break even at current, rock-bottom levels. The world needs much more uranium and the only way that this additional supply can be brought on line is at much higher prices for U3O8.
That’s the Big Picture for the uranium market. Experienced mining investors can clearly see the opportunity implied by these extremely lop-sided supply/demand fundamentals. So where is the “wildcard”?
U.S. Commerce Department investigation
This wildcard actually has two dimensions, with the first one at the political level. By now, any mining investor who has been following the uranium industry will be aware of new political rumblings from the U.S. government with respect to uranium imports into the United States.
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