Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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