Thursday, June 16, 2016
Another "Has uranium bottomed" story
With prices set to double by 2018, we've seen the bottom of the uranium market, and the negative sentiment that has followed this resource around despite strong fundamentals, is starting to change.
Billionaire investors sense it, and they're always the first to anticipate change and take advantage of the rally before it becomes a reality. The turning point is where all the money is made, and there are plenty of indications that the uranium recovery is already underway.
It's been a very tough few years for uranium. But it now looks like we've reached the bottom, and the future demand equation says there's nowhere to go but up-significantly up.
Uranium analyst David Talbot of Dundee Capital Markets is forecasting 6 percent compound annual demand growth through 2020, which is enough, he says, to "kick-start" uranium prices up to and beyond 2007 levels. Morningstar analyst David Wang predicts prices will double within the next two years.
First and foremost, the world is building more nuclear reactors right now than ever before, despite Fukushima. A total of 65 new reactors are already going up, another 165 are planned and yet another 331 proposed.
The market hasn't quite caught on yet to what this massive nuclear development means for uranium because it's still stuck in the Fukushima sentiment--but the cracks are showing and it's about to break free.
At the same time, the uranium industry is not producing the uranium needed to feed the hundreds of new reactors slated to come online. Not even close. The uranium is not being produced because producers can't turn a profit at today's spot prices.
I have been way early on predicting a uranium rebound. But as demand continues to climb as rational countries continue to build out there nuclear fleets supply dwindles as the current price does not allow for a decent profit to be generated so no new mines are getting built. Eventually the supply and demand curves meet and we will see a move in price as the market always corrects and mostly overshoots.
Buying uranium in physical form via Uranium Participation Corp. is probably the safest way to play this until we see a definitive change in the price trend to the upside.