As I write this blog post, the spot price has risen to nearly $42 in a very short space of time. In fact, it’s up almost 46% on the $28 dollar low this year and a look at the chart (which does not show the movements of today’s trading) shows which way uranium is currently headed. I’ve been fielding a lot of questions about the reasons for the climb in price, particularly with some of the spectacular daily price jumps, and wanted to share my thoughts.
Worldwide demand for uranium has been, and will remain, strong. Yes, an overhang was obviously created when Japan shut down its fleet but the industry has been steadily chewing through that overhang and we’ve now reached a point where utilities now have to come back into the market. They are doing so at a time when the market has been oversold based on sentiment rather than fundamentals and with each bit of demand-related news, more utilities are coming forward.
What are the specific catalysts? Positive news from Japan – the first two reactors have cleared the last vote for restarts; increased European issues with Russia – European utilities have already begun sourcing uranium enrichment services elsewhere. In addition, uranium producers have put a number of advanced projects on hold during the past few years and refused to come to the table for long-term contracts at low prices.
All commodity prices fluctuate but my belief is we’ll see yet more increases over time because producers are still not making money at current prices and, as I blogged earlier this year here and here, security of supply has become a major industry concern and the nuclear reactor construction boom continues.
Anthony Milewski, Director of Fission Uranium
