The price of uranium has reached its highest level in over two-and-a-half years, as market demand increases for big producers, and China commits to building new plants in a bid for cleaner alternative energy.
Uranium’s price spiked at $28.75 per pound last Friday — its loftiest level since March 2016.
During the last uranium resource rush we saw some of the most impressive stock runs in history, like Paladin Energy’s monumental 20,000% boom. This is why Greg Canavan, Money Morning contributor, believes uranium stocks could climb even higher — you can read more about this in his free report, available here.
Chinese party aiding uranium price
Later this month, the Chinese Communist party is expected to recommit to the use of nuclear power at its Plenum site, which will likely support prices.
Meanwhile, analysts at Berenberg said that coming into 2019, we could expect to see further price hikes, as big producers like Cameco could enter the spot market in an attempt to secure volumes for future trading. From the analysts:
‘Cameco should continue to be active in the spot market as it needs to buy 9-11m pounds of uranium by the end of 2019.
‘Friday’s price jump is probably attributable to other buyers (as well as Cameco) entering the spot market in order to secure volumes.’
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Another factor helping uranium price is a series of mine closures that have put pressure on Canada’s Cameco to buy uranium in the spot market to maintain long-term sales contracts.
Kazatomprom, the world’s biggest producer of uranium, is set to raise as much as $600 million from initial public offerings in the UK and Kazakhstan, as reported by The Financial Times. In a recent press release, Kazatomprom said:
‘The Company believes that the supply side of the uranium market is undergoing a structural shift, following a prolonged period of depressed spot prices and oversupply, underpinned by the prevalence of legacy long-term contracts, the majority of which were concluded in the period between years 2005 and 2012.’
Why the rush to buy uranium?
While the reason companies are buying up volumes of uranium seems pretty straight forward, it also has something to do with the fact that a large portion of these contracts look to expire come the early 2020s.
Meanwhile, many in the uranium sector are set to return to the market in the near-to-medium-term in an onset to cover future fuel requirements with future contracts.
For Money Morning
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