Going Nuclear :: Uranium
Macro Profile on the sector with URA and CCJ charts
Uranium is a sustainable energy source that is primed for a continued resurgence in the face of growing energy demands, geopolitical pressures and a transition to a new low carbon, green world.
Recent developments over the past year have put it back in the spotlight, and helped uranium go from a 2017 low of $17.70/lb to the current price of $57.90/lb, the highest prices in a decade. We put our current 2022 price target at $70-80 for uranium, with higher possible. Prices in 2011 were $70/lbs and in 2007 as high as $138/lb for reference.
7 Reasons We Believe Uranium Prices will Continue to Surge into 2023
1. Facing an energy crisis, the European Commission recently declared nuclear energy a sustainable form of energy and included it in the EU Taxonomy (EU taxonomy is a classification system, establishing a list of environmentally sustainable economic activities).
2. Increasing nuclear reactors – currently 445 reactors around the globe supply 10% of the world’s energy requirements
a. China constructing 16 new reactors
b. Russia constructing 3 new reactors wi11 planned
c. India has 11 reactors under construction.
d. Canada with plans to build small scale reactors.
e. The UK plans to increase nuclear energy supply from 16% to 25%
f. France phasing out 14 old reactors but building 14 new reactors.
g. Strong US bipartisan support in Congress for nuclear power.
3. Restriction of uranium supply by miners
a. Prices for some time remained below the production costs of many producers. Instead of mining at a loss over the past few years, many used free cash flow to buy uranium on the open market. This has helped put a floor in uranium prices.
b. Uranium miners have agreed to adhere to production cuts to keep price elevated. Cameco Corporation (CCJ), the largest uranium producer, just committed again to restrict supply.
4. Demand is outpacing supply. Currently the difference is about 90 million pounds. As uranium prices rise, mining activity will rise but it is estimated the supply gap will average around 45 million pounds over the next 10 years
5. Geopolitical pressures are helping drive up prices. In the US, nuclear energy comprises about 20% of the electricity and it relies on Russia for 16% of imports. Lawmakers have introduced bills in the senate to ban US imports of Russian uranium.
6. The majority of uranium is not purchased on the open market, but through long term contracts by utilities that operate nuclear power plants. Demand is set not only from consumption in a given year, but the volume utilities put under contract for future years as well. Looking at demand, it is estimated that demand will increase from 70 million pounds to 200 million pounds in the coming years. Years of under-contracting for future supply has created significant uncontracted needs. It can take about 2 years to turn uranium ore into fuel, and so the expectation is in 2022 utilities will be looking to secure long term contracts for the years ahead.
7. Introduction of Sprott Physical Uranium Trust SRUUF – currently holding 54,699,000 lbs of uranium, making it unavailable for utilities, and driving down supply and driving up the price of uranium.
*Uranium has had a nice run this year while the general market has declined. Uranium prices are around decades highs. We have been holding for quite some time and many of our holdings are up significantly. The sector is very volatile, and we will most likely be waiting for pullbacks to take any new positions or add to existing positions in my portfolio.
URA and CCJ Charts with the Levels we are Watching
URA is at an inflection point on the daily chart. Below the blue pivot and we will consider adding to our position at the 23.95-24.27 and 23.38-23.55 areas. A breakout over the pink breakout pivot and there may be some turbulence in the 28.27-28.56 area before higher if that area is breached.
The CCJ weekly chart is in a strong uptrend, but because of some divergence it’s possible that dip buyers may get the opportunity to scale in. Should price action stay below the pink breakout line, we are watching the 23.59 and 22.05-22.22 for potential adds. Above the pink line breakout and we see potential resistance at 32.87 and 37.38.
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