When it comes to commodities, “there is perhaps no better bet than uranium”, Scott Melbye of uranium miner Uranium Energy told Barron’s. And not before time. The metal, used in nuclear reactors, soared in the 2000s.
Between 2004 and 2007 the spot price quadrupled, reaching more than $140 per pound before falling back. A bear market ensued, which deepened when the Fukushima disaster struck in 2011. But now things are looking up. In mid-2018, the spot price stood at $23 per pound, roughly the same as two years ago. Now it is up by around a quarter.
One key source of demand, says Myra Saefong in Barron’s, is emerging markets such as India, China (the biggest market for uranium), and Saudi Arabia. They are set to use more uranium as further economic growth requires more electricity. Last year, Saudi Arabia invited building proposals for its first two nuclear reactors; it is planning to develop up to 16.
Meanwhile, major producers have cut back amid the long bear market. This year global output is likely to slip below 135 million pounds in 2018 from a 2016 peak of 162 million.
No wonder, then, that more and more uranium plays are coming to market. A new uranium investment vehicle, Yellow Cake, began trading on Aim last summer; the world’s largest uranium producer, Kazakhstan-based Kazatomprom, has also just floated in London.