Thursday, January 12, 2017

After many false starts we may be seeing a bottom in uranium

World Nuclear News:

Kazakhstan plans to produce 10% less uranium in 2017 than previously planned in response to ongoing oversupply in the uranium market, KazAtomProm chairman Askar Zhumagaliyev announced today.

In total, Kazakh uranium production for 2017 will be 2000 tU less than previously planned. The reduction is roughly equivalent to 3% of total global uranium production based on 2015 figures.

In commodity markets oversupply leads to a collapse in prices. The cure for low prices is low prices. What I mean by this is that as prices decrease fewer and fewer companies can produce at a profit. Eventually the high cost producers are run out of business and a shortage develops thereby allowing prices to rise again.

The cutting of production by the largest uranium producer  is an indication that we may near a bottom in prices. Uranium stocks have been performing well recently. We do know from previous experience that stock prices of resource will move in advance of a move in the resource they produce. This is because the "smart money" is positioning itself in advance of a move. 

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