Analysts expected the
uranium rebound to begin in 2020, but the expectation was of a slow,
long-term movement. Instead, the COVID-19 pandemic has sped things up, and the sector is already seeing a resurgence.
When the markets worldwide dropped in March, uranium stocks and other metal plays receded as well. What’s happened since, however, has been a
steady and consistent rise in uranium prices not seen by industry insiders in a long time.
The reason? Investors familiar with uranium know that the sector was headed to a tipping point, with rising, prolonged demand on one side set to clash with a reduction in supply glut. As the pandemic has swept through the world, mines have been forced to cease productions because of safety restrictions, including the largest uranium producers cutting output significantly.
All of a sudden, the paradigm has shifted. What was once a uranium supply glut ripe with overproduction and use of stockpiles has turned into a situation of undersupply and expected shortfalls in stockpiles. Uranium prices, long dwindling below US $30.00/lb, have climbed above $32.00/lb.
And with more than
half of the world’s uranium production cut, experts expect the pressure to continue. The world’s largest producers, Kazakhstan’s
Kazatomprom and Canada’s
Cameco Corporation (
TSX:CCO), have
closed mines,
ceased productions, and
extended their production suspensions. Each time, it has driven uranium prices and stocks, including Cameco’s own, higher.
(Three-month price chart for Cameco Corporation)
The effect isn’t just on majors, it’s industry wide. The Stockhouse Bullboards have been quick to notice the rise of uranium majors and small-caps alike,
recently highlighting both
UEX Corp. (
TSX:UEX) and
Fission Uranium Corp. (
TSX:FCU). In fact, highlighting every uranium play that has seen gains over the past few weeks would take longer than explaining the situation.
For investors looking to enter the market and wary that the effects of the pandemic will be short-lived, there are a few factors to consider. Once the largest uranium producers come back online, prices will inevitably recede. But the longer they’re shut down for, the longer-lasting the impact on the uranium market, and so far the shutdowns have only been extended.
It’s also vital to remember that experts have been expecting a turn of the uranium tide regardless of current events. If anything, a constrained supply for any duration will only serve to make that long-term shift happen sooner rather than later, as stockpiles dwindle and energy generators can’t reduce their demand at the same time.
Whether or not you decide to follow a major producer, a uranium small-cap, or the metal itself, make sure you stay up-to-date on the market. The time to pay attention isn’t when uranium prices climb back above US $40.00/lb and everything’s already in motion, it’s right before.
For more of the latest info on Metals & Mining stocks, check out the Metals & Mining Trending News hub on Stockhouse.
FULL DISCLOSURE: Fission Uranium Corp. is a client of Stockhouse Publishing.