Uranium’s Decade-Long Bear Market
Uranium, the fuel for nuclear reactors, found itself in the throes of a nearly decade-long bear market.
Japan evacuated 300,000 people in 2011 following the tsunami that struck the Fukushima nuclear power plant.
Most of the towns and cities affected remain abandoned.
Although nuclear disasters are rare, the impact left a lasting mark. The Fukushima disaster spooked developed nations from investing in nuclear power.
The price of uranium fell 74% from its high of $73 in 2011 to its low of $19 in 2016.
2018 was shaping up to be another difficult year for uranium.
New plants are still years out. Meanwhile, the market is still flooded with supply.
However, uranium is rallying.
Uranium’s Demand Is Set to Grow
Uranium is in a tug-of-war between supply and demand.
After years of overproduction, a glut of uranium remains on the market. That’s kept prices below $40 for the last four years.
Cameco and Kazatomprom, two major uranium miners, announced cuts to production. In an act of triage, they shuttered mines to protect their bottom lines.
But demand is set to grow.
While developed nations are reluctant to build new plants, developing countries are steaming ahead.
China is going to boost its number of reactors by a third in the coming years. South Korea and India are set to build plants at a similar rate.
As you can see in the chart below, uranium prices are up 40% this year.
However, even with prices rallying 40% this year, major uranium producers have struggled to return that value to shareholders.
Cameco has yet to return to its 2016 highs, when the price of uranium was similar to today.
Waiting in the wings are a number of junior uranium miners in North America. The promise of a new golden age for uranium has spurred investors to pour money into low-cost projects.
It will be a difficult balancing act to keep production low long enough for prices to return to the $40 to $70 range where producers can turn a healthy margin.
In Real Wealth Strategist, we’re keeping an eye on the uranium market. This rally has further to go before it can prove that it is more than a flash in the pan.
Internal Analyst, Banyan Hill Publishing