Why Uranium is an interesting investment in 2022?


Uranium investment has gained a lot of attention in the past few months. Uranium is an important source of fuel for the nuclear energy industry.

With the increasing threat of escalation of Russia-Ukraine war does this make an important investment? &

How can I trade Uranium?

Uranium Price over the last two decades

Uranium is an important source of fuel for the nuclear energy industry. Uranium has a high price volatility and tends to move along with the forces of supply & demand and geopolitical pressures. The price of Uranium between 2000–2010 has shown great volatility. Uranium price was at a low of 7$/lb in 2000, from 2003 Uranium started showing an upward trend in prices, with prices booming from 2005 to 2007 and peaking at $138/lb. Then the price of Uranium saw a dramatic fall to 40$/lb in 2010. As it was clear that demand will remain much larger than supply of Uranium the prices saw a rise again to $70/lb in early 2011. After the Fukushima Nuclear Accident which occurred on 11 March,2011, Uranium saw a panic selling which pushed the prices towards a long-term bear market. Price of Uranium dropped to a low of $18.56/lb in November,2016. Falling Uranium prices in turn lead to fall in share price of companies in the Uranium Industry. This resulted in capacity reduction, shutting down of operations and deferring of new production by the Uranium companies worldwide. During Covid-19 the demand for Uranium remained steady as nuclear plants continued operating without any disruptions. The pandemic caused supply disruptions; these supply disruptions helped Uranium in a significant price recovery of 40% from a low of $23.90 in March 2020 to a high of $34.10 in May 2020. Price of Uranium remained steady between 27.70$ to $33.00 till July 2021. The Russia-Ukraine crisis has pushed the price further toward $60, which is the highest since the Fukushima Nuclear Accident.

Demand for Uranium

There are about 440 reactors around the world with combined capacity of 390GWe which requires about 62500 tonnes of Uranium(tU) each year. A single unit of increased capacity in GWe requires an additional 150 tU/yr and about 300–450 tonnes of Uranium for first fuel load in a new reactor. As the world becomes more concerned about carbon emissions, the scope of growth for nuclear capacity is very high as nuclear energy is not only carbon free but also a reliable and safe source of energy. There are about 54 reactors under construction along with 100 reactors planned in 17 countries. 325 reactors are being proposed in 31 countries, which will lead to growth in the demand for Uranium. According to the World Nuclear Association’s Nuclear Fuel Report there will be an increase in demand of 27% over 2021–30 and 38% over 2031–40.

Supply for Uranium

Mines in 2020 supplied about 56287 tonnes of Uranium Oxide concentrate containing 47731 tU which was only 74% of annual requirement. The remaining requirement was fulfilled by the secondary supplies of Uranium. To match the growing demand of Uranium, there will be a need to increase the supply of Uranium. To unlock new and already suspended supplies of Uranium, there is a need for an increase in price of Uranium as the extraction cost for Uranium is high.

How sound I trade Uranium?

Uranium, unlike other commodities, does not trade in an open market. Alternative way to invest in Uranium is through the stock market. Uranium prices can be traded through investment in shares and exchange-traded funds (ETFs).

ETFs as the name suggests are traded on an exchange just like stocks. The price of ETFs change throughout the day as shares are bought and sold. An investor can invest in an ETF the same way as he does in a stock. Uranium ETFs make investment in stock of companies which are involved in mining and other activities related to Uranium Production.

Below are some Uranium based ETFs along with their performance in the recent time: -

  1. Global X Uranium ETF(URA)

Underlying Index — Solactive Global Uranium & Nuclear Components Total Return Index

AUM — $1949.59 mil

Expense Ratio — 0.69%

URA’s targeted segment is Uranium mining and the production of nuclear components. URA is a passive fund whose aim is to provide results corresponding to price and performance of Solactive Global Uranium & Nuclear Components Total Return Index.

2. Sprott Uranium Miners ETF(URNM)

Underlying Index — North Shore Global Uranium Mining Index

AUM — $1100 mil

Expense Ratio — 0.85%

Sprott Uranium Miners ETF is a relatively new ETF, fund inception took place on December 3, 2019. It is also a passive fund which seeks to invest 80% of its asset in the securities of North Shore Global Uranium Mining Index.

Future of Uranium

As the demand for Uranium is set to rise in near future, the focus is mainly on supply as supply has remained almost constant and deficit has been covered by secondary supplies. As the demand increases, these secondary sources are depleting faster and there soon will be need for increased supply from primary sources. The secondary sources can still last a year or two, hence steady prices can be seen for the next year. Rise in Uranium price can be expected over the year 2023–2025, which can push the price to pre–Fukushima Nuclear Accident level. As the cost of new supplies and resumption of suspended supplies could result in high cost, further rise in prices can be expected.

About Uranium:

Uranium is a radioactive chemical element which is majorly used for its nuclear properties in nuclear power plants and nuclear weapons. Uranium is widely spread in rocks as well as seawater. Uranium is a heavy metal, which is a relatively clean burning source as a small amount of Uranium can produce the same amount of power as coal, without any harmful emissions which are released by coal. Uranium has become an abundant source of concentrated energy for more than over 60 years, which makes it an important metal.

There are two sources of Uranium i.e., primary production from mines which is supplemented by secondary sources consisting mostly of ex-military grade Uranium, recycled Uranium and civil stockpiles. Over 2/3 of the world’s total production of Uranium comes from Kazakhstan, Australia and Canada. Mining of Uranium needs consideration of many factors such as location, grade, depth and nature of Uranium orebody. These factors affect the cost of mining Uranium. The cost of mining majorly comprises capital costs, operating costs and indirect costs. For the recovery of Uranium to be economical the site should have sufficient concentration of Uranium.

Article was written for www.ToroAlerts.com