Uranium Gains Momentum, Surpasses All Commodities Amid Virus
Uranium is one of the few commodities that has witnessed a notable price increase amid the outbreak of novel coronavirus. While the recent pandemic weighed heavily on demand and prices of most energy products plus industrial metals like copper and steel, uranium’s use as a key power generation fuel has kept its consumption stable.
The radioactive metal has risen nearly $10/LBS or more than 35% so far this year, outperforming the world’s other major commodities. The gains have been stimulated by mine shutdowns due to COVID-19 safety measures that reduced more than a third of annual global uranium supply at a time when demand from power plants has remained strong.
Energy and electricity consumption has remained relatively stable as demand from power plants has been sustained amid the prevalent adversities. Uranium also stands to benefit from supply imbalance aggravated due to the COVID-19 pandemic. The industry is facing supply curtailments due to mine closures by industry giants, Canadian uranium producer Cameco Corporation CCJ and Kazakh miner Kazatomprom among others are expected to leave a profound impact on the uranium prices.
While Cameco suspended operations indefinitely at the Cigar Lake mine in Canada, which has the largest high-grade uranium deposit in the world, Kazatomprom halted nationwide production for three months to break the chain.
Roughly 85% of global annual uranium demand is met through long-term supply contracts between producers, such as Cameco, Kazatomprom and utilities. With the possibility of indefinite mine closures hitting the uranium supply, utilities will face an increased competition to secure supply contracts, further fuelling the uranium rally.
Also, the non-interdependence between uranium and other energy and metal commodities has been pivotal in drawing new participants toward the uranium futures markets
Uranium market is gaining interest nine years after the 2011 Fukushima disaster in Japan, which massively damaged the Fukushima Daiichi power plant. It was considered the end of nuclear power globally, resulting in a glut of metal pile-up in warehouses and a slump in prices. However, global nuclear output reached the pre-Fukushima levels, courtesy of contributions from China, Russia and South Korea, reckons Bruno Brunetti, head of Global Power Planning, S&P Global Platts Analytics.
Stocks to Focus on
With uranium continuing to defy the crisis in the commodities market, we are presenting three companies, each with a Zacks Rank #1 (Strong Buy), 2 (Buy) and 3 (Hold) that investors should watch out for.
Energy Fuels Inc. UUUU is engaged in mining, producing and developing uranium and vanadium. The stock recently acquired Prompt Fission Neutron (PFN) from GeoInstruments Logging LLC, which is essential to successfully produce uranium from ISR deposits.
Cameco Corporation is one of the world's largest uranium producers, a significant supplier of conversion services and one of two CANDU fuel manufacturers in Canada. Their competitive position is based on their controlling ownership of the world's largest high-grade reserves and low-cost operations. Over the last four quarters, the stock’s earnings surpassed the Zacks Consensus Estimate thrice .
Uranium Energy Corp. UEC is a US-based junior resource company with the objective of becoming a near-term ISR uranium producer in the United States. The company controls one of the largest historical uranium exploration and development databases in the United States.