Categories:
Energy
/
General Market Commentary
Topics:
General Energy
/
General Market Commentary
Uranium surges 31% amid shutdowns to become year’s top commodity
While most commodities are getting hammered by the coronavirus crisis, uranium prices are skyrocketing.
The radioactive metal used in nuclear fuel has climbed 31% this year, making it the world’s best-performing major commodity. The gains have been spurred by mine shutdowns that have wiped out more than a third of annual global output at a time when demand from power plants has remained relatively stable.
“This is a bit of a one-two punch in uranium’s favor,” said Nick Piquard, a portfolio manager at Horizons ETFs. “Not only has Covid-19 likely not impacted nuclear power demand very much, but it is certainly impacting supply.”
While demand for energy, including nuclear, is taking a hit due to the pandemic, many atomic power plants are expected to keep open. That’s partly because coal- and gas-powered plants are easier to turn on and off than nuclear facilities, so it’s worth keeping them running even if electricity demand declines somewhat, Piquard said.
The uranium industry has been in the doldrums since the 2011 Fukushima disaster in Japan, which led to the shuttering of most of that country’s nuclear reactors as well as a rethink of nuclear power worldwide. The shift led to a glut of the metal piling up in warehouses, sending prices down by as much as 75% from the highs in 2011.
In response to low prices, two industry giants, Kazatomprom and Cameco, have been curtailing uranium production in the past three years to reduce the global glut.
The Covid-19 crisis has accelerated that process with a jolt. Kazatomprom, the largest uranium producer, announced earlier in April it was reducing operational activities at its uranium mines in Kazakhstan for about three months.
Meanwhile, Cameco further decreased its own output last month by halting production at Cigar Lake in Canada, the world’s largest producing mine -- then extended the suspension for an “indeterminate” period on April 13. The company also shut some operations at its Port Hope fuel-service facility for four weeks.
All told, the shutdowns wiped out about 46-million pounds, or about 35%, of annual global uranium output, over three weeks, according to Cantor Fitzgerald analyst Mike Kozak.
As in other countries, US reactors are considered essential infrastructure, and utilities are implementing resilience plans to ensure they remain in operation to keep the power flowing. The Nuclear Regulatory Commission issued guidance in March for utilities to request longer shifts for workers if needed, and is also letting companies defer some inspections.