Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Covid, Debt and Precious Metals - 3rd Jun 20
Gold-Silver Ratio And Correlation - 3rd Jun 20
The Corona Riots Begin, US Covid-19 Catastrophe Trend Analysis - 3rd Jun 20 -
Stock Market Short-term Top? - 3rd Jun 20
Deflation: Why the "Japanification" of the U.S. Looms Large - 3rd Jun 20
US Stock Market Sets Up Technical Patterns – Pay Attention - 3rd Jun 20
UK Corona Catastrophe Trend Analysis - 2nd Jun 20
US Real Estate Stats Show Big Wave Of Refinancing Is Coming - 2nd Jun 20
Let’s Make Sure This Crisis Doesn’t Go to Waste - 2nd Jun 20
Silver and Gold: Balancing More Than 100 Years Of Debt Abuse - 2nd Jun 20
The importance of effective website design in a business marketing strategy - 2nd Jun 20
AI Mega-trend Tech Stocks Buying Levels Q2 2020 - 1st Jun 20
M2 Velocity Collapses – Could A Bottom In Capital Velocity Be Setting Up? - 1st Jun 20
The Inflation–Deflation Conundrum - 1st Jun 20
AMD 3900XT, 3800XT, 3600XT Refresh Means Zen 3 4000 AMD CPU's Delayed for 5nm Until 2021? - 1st Jun 20
Why Multi-Asset Brokers Like are the Future of Trading - 1st Jun 20
Will Fed‘s Cap On Interest Rates Trigger Gold’s Rally? - 30th May
Is Stock Market Setting Up for a Blow-Off Top? - 29th May 20
Strong Signs In The Mobile Gaming Market - 29th May 20
Last Clap for NHS and Carers, Sheffield UK - 29th May 20
The AI Mega-trend Stocks Investing - When to Sell? - 28th May 20
Trump vs. Biden: What’s at Stake for Precious Metals Investors? - 28th May 20
Stocks: What to Make of the Day-Trading Frenzy - 28th May 20
Why You’ll Never Get Another Stimulus Check - 28th May 20
Implications for Gold – 2007-9 Great Recession vs. 2020 Coronavirus Crisis - 28th May 20
Ray Dalio Suggests USA Is Entering A Period Of Economic Decline And New World Order - 28th May 20
Europe’s Coronavirus Pandemic Dilemma - 28th May 20
I Can't Pay My Payday Loans What Will Happen - 28th May 20
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20

Market Oracle FREE Newsletter


Uranium's Stealth Bull Market Garners Momentum

Commodities / Uranium Apr 28, 2020 - 05:44 PM GMT

By: The_Energy_Report


With the supply/demand balance moving in favor of miners, the outlook for uranium stocks is the brightest it has been in years, according to McAlinden Research Partners.

SUMMARY: Uranium has been enjoying a stealth bull market due to the coronavirus outbreak. Temporary mine closures to slow the spread of the virus at production facilities have triggered an unexpected supply squeeze, sending the price of uranium up nearly 30% since the beginning of March. According to one analyst, half of global production has been cut. With the supply/demand balance moving in favor of miners, the outlook for uranium stocks is the brightest it has been in years.

An ongoing supply shock is moving the uranium market's demand/supply balance in favor of miners, strengthening their pricing power in the process.

2020 Supply Shock

The world relies on four countries for 75% of its uranium supply: Kazakhstan (40% of global supply), Canada (13%), Australia (12%) and Namibia (10%). What's more, about 65% of global output is sourced from just six mines. Following the example of millions of other businesses around the planet, some of those mines have temporarily suspended operations to slow the spread of COVID-19 infections at their facilities.

In Kazakhstan, all uranium mines will cease production for a three-month period, according to an announcement made last week by the country's national atomic company, known as Kazatomprom. For 2020, Kazatomprom had planned to churn out about 22,800 tonnes of uranium (50.3 million lbs), but that volume will be lower by as much as 4,000 tonnnes (8.8 million lbs) or 17.5% due to the mine closures.

Over in North America, Canada-based producer Cameco has suspended operations at Cigar Lake—the world's single largest uranium mine—for an indeterminate period, or until such time as "a safe and sustainable restart is possible." The Cigar Lake mine produces 18 million lbs of uranium annually, equivalent to 13% of global supply. With this decision, Cigar Lake joins other Cameco-owned mines and milling operations that have been reduced to care-and-maintenance activity levels since 2016.

On the African continent, mines in Namibia and South Africa are also on lockdown to protect workers from the virus' spread.

Shifting Demand/Supply Balance

Output curbs are not unusual in the uranium world. After nearly ten years of price declines, most mines are operating at loss-levels. In response to these market conditions, miners have been curtailing production for several years already.

Global uranium output stood at 53,500 tonnes in 2018, down 10% from a year earlier and down 14% from the year before that. The quantity extracted was enough to fulfill just 83% of global demand at the time. To meet consumption needs, the market has had to tap into existing stockpiles and recycled material to make up the difference.

Annual global demand for uranium now stands closer to 150 million lbs or 68,000 tonnes. That reflects a demand increase of 8% in two years without a commensurate increase in global production, which at the moment amounts to about 125.5 million lbs of uranium. Accounting for this year's unexpected output disruptions due to the COVID-19 pandemic, the supply deficit will only grow larger and global stockpiles will be depleted at a faster rate.

We mentioned earlier that Kazatomprom's output for 2020 will decrease by 8.8 million lbs because of its three-month-long mine closures. That alone translates to 7% of global output disappearing, which is quite significant.

Upward Pressure on Uranium Prices

On March 16, 2020, uranium was trading at $23.90/lb according to Trading Economics. Now, just one month later, the price of uranium has reached $32.00/lbs. The 33% price jump reflects the market's reaction to the temporary supply shock. While the current price is still below the $40–$60 breakeven level for most mines, the upward pop certainly improves their prospects.

If production remains below pre-COVID-19 levels even after the shuttered mines resume operations, some power companies will draw down their inventories to the point at which it becomes urgent for them to secure new long-term supply contracts with miners. When that happens, uranium producers will enjoy stronger pricing power than they have seen in at least four years.

Another catalyst on our radar is the possibility of the United States building up stockpiles for its national uranium reserve. In his latest proposed budget, President Trump has earmarked $150 million a year for that purpose. Whether Congress approves the request remains to be seen. The biggest beneficiaries would be U.S. producers as well as some Canadian miners, since the most economically viable deposits of uranium in North America happen to be in Saskatchewan, Canada.

How to Invest

The Global X Uranium ETF (URA) and the more recently launched North Shore Global Uranium Mining ETF (URNM) both provide exposure to uranium miners. Investors looking for single-stock exposure will find that most of the pure-play names have become penny stocks following the industry's almost decade-long bear market. One of the rare exceptions is Cameco (NYSE: CCJ).

This content was delivered to McAlinden Research Partners clients on April 16. To receive all of MRP's insights in your inbox Monday - Friday, follow this link for a free 30-day trial.

McAlinden Research Partners (MRP) provides independent investment strategy research to investors worldwide. The firm's mission is to identify alpha-generating investment themes early in their unfolding and bring them to its clients' attention. MRP's research process reflects founder Joe McAlinden's 50 years of experience on Wall Street. The methodologies he developed as chief investment officer of Morgan Stanley Investment Management, where he oversaw more than $400 billion in assets, provide the foundation for the strategy research MRP now brings to hedge funds, pension funds, sovereign wealth funds and other asset managers around the globe.

Disclosure: 1) McAlinden Research Partners disclosures are below. 2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security. 3) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. The author was not paid by Streetwise Reports for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy. 4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports. 5) From time to time, Streetwise Reports and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.

McAlinden Research Partners: This report has been prepared solely for informational purposes and is not an offer to buy/sell/endorse or a solicitation of an offer to buy/sell/endorse Interests or any other security or instrument or to participate in any trading or investment strategy. No representation or warranty (express or implied) is made or can be given with respect to the sequence, accuracy, completeness, or timeliness of the information in this Report. Unless otherwise noted, all information is sourced from public data.

McAlinden Research Partners is a division of Catalpa Capital Advisors, LLC (CCA), a Registered Investment Advisor. References to specific securities, asset classes and financial markets discussed herein are for illustrative purposes only and should not be interpreted as recommendations to purchase or sell such securities. CCA, MRP, employees and direct affiliates of the firm may or may not own any of the securities mentioned in the report at the time of publication.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules