Uranium equities have soared since early June.
Global X Uranium ETF gained 16% in just a couple of weeks and keeps heading higher.
Will this trend continue?
Let’s dig in.
As you know, we’ve been covering the clean energy transition megatrend here at the Financial Star for a while now. The shift from fossil fuels to clean energy sources is inevitable.
Over the coming years and decades, we’ll see most “dirty” energy generation facilities replaced with their clean counterparts. Solar, hydro, wind, and nuclear are the future of energy.
It may be surprising for some, but nuclear plants have minimal emissions compared to other sources. Uranium fission reactions heat water that turns into steam and drives steam turbines, no carbon emissions involved.
Nuclear power plants are even cleaner than natural gas energy installations.
On top of that, nuclear power is highly efficient and stable. No need for the sun to shine or the wind to blow. It provides steady baseload power capacity no matter what.
These qualities of nuclear power make it a great fit for the clean energy transition. As the world shifts away from coal, oil, and natural gas, nuclear power will help to keep the lights on.
As a result, the demand for nuclear energy started to pick up, and the price of uranium and stocks exposed to it followed the trend.
Triple-Digit Gains in This Megatrend
Over the last three years, uranium has gained 120% in price. The companies working in the sector appreciated, too. Global X Uranium ETF gained 130% during the same period.
It has been a steady recovery of the nuclear industry with more to come, especially for companies working in the US.
Some call it the “nuclear Renaissance.”
You see, the US imports most of its nuclear fuel. Most of these imports come from Kazakhstan and Russia, not the most stable or friendly countries to rely on.
This is why the White House is pushing a new act to prevent US-based utilities from buying nuclear fuel from certain unfriendly nations. These include Russia and China.
No wonder the government wants to avoid these countries and establish a domestic uranium supply chain.
That’s the main reason we’ve seen excellent gains in North American uranium stocks, and we believe it’s only the beginning.
The ADVANCE Act is still in its early stages, and even if approved, it will only limit the signing of new uranium contracts. There will be no immediate purchase ban within existing agreements, but future deals will have to rely on domestic supply.
Uranium mining companies will be at the forefront of this megatrend.
But there is a problem. Which is also an opportunity.
It won’t be easy to bring more uranium to the market, at least in the short term.
Last year, US mining companies produced only 194,000 pounds of uranium, a 96% drop from 4,577,000 pounds produced in 2013.
Domestic uranium production is set to recover, and the companies that can first deliver uranium to the market will benefit the most.
As a part of the clean energy megatrend, we encourage our readers to consider adding US-based uranium producers and developers to their watchlists.
These stocks may benefit from the recovery in the sector and the rising price of the underlying commodity.
Thank you for your loyal readership,
The Financial Star team