Another week… Another big feat for Uranium.
This time Uranium futures price hit a 15-year high!
On Monday 21 November, Uranium futures tracking the form known as yellowcake hit $80.25 on the New York Mercantile Exchange (NYMEX) – pushing the return past 50% in 2023.
Making it one of the best performing commodities – in a year where most commodities have crashed.
*** Most commodities went nowhere this year, except for these***
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So what’s been driving the Uranium futures price recently?
Despite the continuous implementation of solar and wind power in 2023, countries have started to realise that these green energy solutions may not be enough to stabilise electrical grids.
As a result, countries have turned to nuclear as a solution.
That means demand for Uranium has increased. Most notably from France as the country abandoned plans to reduce its share of nuclear energy to 50%.
China is also moving towards nuclear with plans to triple its nuclear capacity from 38GW in 2017 to its current target of 120–150GW by 2030.
According to a note by Colin Hamilton, Managing Director for commodities research at BMO,
“Utility contracting continues to pick up,” and “there’s very little uncommitted production available to meet uncovered utility requirements.”
In other words, there’s just not enough supply to meet demand.
If other countries add a mix of nuclear to their low-carbon targets, then the supply problem will only worsen over the next decade.
Supply has been under pressure – even before the Uranium futures price breakout.
And it certainly hasn’t got any better.
The latest data shows European inventories have fallen 21% since 2018 as Western players shunned Russian nuclear fuel. This enriched Uranium has been the primary fuel for European reactors.
Plus, the world’s second largest Uranium miner – Cameco – recently reported that challenges at its Cigar Lake mine, Key Lake mill, and McArthur River mine are going to negatively impact its production forecast.
Total Uranium production from operations is set to drop 9%.
To add to this, other big miners will miss their own production targets due to upgrading and maintenance of mines and mills.
Then, you also need to remember that Uranium miners need incentives to start Uranium production from idle mines.
In other words, it’s important to look at the incentive price of Uranium. That is the price at which producers can produce Uranium and still turn a profit.
According to Steven Schoffstall, Director of ETF product management at Sprott,
“That’s currently around the $75 to $80 range. That would suggest that, at least in the short term, there is some additional room for the price of Uranium to move.”
I’ve called for the Uranium futures price to hit $100 in the future. And I’m confident it will achieve this level sooner rather than later.
It’s one of the most attractive sectors to watch for the remainder of 2023 and into 2024. If you want to stay in the loop, then join South African investor.
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