Output of the global uranium market has dropped off in 2018 against growing demand in Asia, which is driving prices higher.
A low price environment has also caused major uranium producers to suspend production, which has helped lift prices to fix the supply and demand imbalance.
This year uranium mines in Canada, United States and Namibia have even halted their production, which saw global production fall by 16%. In the last four months, uranium prices have lifted 30% due to changing fundamentals and new interest in alternative energy, reported The Street.
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.
Uranium demand restores supply/demand imbalance
As The Street reports, while supply may have fallen, demand for uranium is only increasing. In November this year, there were 54 nuclear reactors under construction in the world, 25% of which were located in China.
Because of this fact, we have seen prices begin to recover. Uranium futures finished at $29 a pound on 27 November — the most active trading day since December 2015.
In response to the deficit, US energy producers have upped purchasing and building stocks in response to possible supply decline. Since then, open contracts in uranium futures have grown by 87% after prices began recovering halfway through this year.
This, along with mounting volatility has spiked a massive increase in risk management in uranium, drawing new players into the emerging uranium market.
We’ve seen more involvement from general investors as well as fund managers who have also noticed recent price hikes. More liquidity is helping electricity producers looking to contain exposure to their fuel price.
In 2019, investors can expect a bit of a correction period as prices increase following great production halts, which had previously affected supply.
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PS: Discover how you could take advantage of the next big resource rush. Greg Canavan shares how you could capitalise on uranium’s next potentially colossal comeback. To find out more read his free report ‘The catalysts set to spark Uranium’s next Blockbuster Bounce-Back’, available now for download.