Hedging Against Rising Uranium Prices using Uranium Futures

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Demo Account!
    Free Trading Education!
    Sign-up Bonus!

  • Binomo
    Binomo

    Trustful Broker!

Uranium Price Forecast: Going Up?

A look at where analysts see the uranium price moving in the short and long term.

The uranium price officially hit an 11-year low on August 5, dwindling back down to $25 a pound where it was in 2005, even before the 2020 Fukushima disaster. Analysts have been long speculating when the uranium sector will recover from Fukushima, but that recovery could still be several years away.
Year-to-date, the uranium price is down 27 percent and hasn’t been able to recover due to the oversupplied market, according to FocusEconomics‘ August 2020 report. Still, while the sector remains bleak, it is expected to improve. The Investing News Network (INN) looked at what analysts are saying about the uranium outlook and at a few uranium stocks to watch.

Investing During the Pandemic

Discover what experts see coming for resources and commodities amidst the Coronavirus pandemic.

Uranium price forecast improving?

Analysts surveyed by FocusEconomics’ expect the prices to gradually rise due to an increase in demand from India, Russia and China, with prices averaging $33.20 per pound in the fourth quarter of 2020. Dipping into 2020, panelists expect the price to continue rising to an average of $39.50 by the fourth quarter.
While uranium is currently seeing rock bottom prices, it certainly has come a long ways to go in just a few short months to rise above the $30 per pound mark.
At the end of July, Cantor Fitzgerald released its 2020 Quarterly Commodity Outlook and noted that the spot uranium price of $27.55 for the Q2 2020 was lower than its estimate of $33 per pound. Rob Chang, senior analyst at Cantor Fitzgerald, noted their expectation that utilities would begin “accumulating uranium for their upcoming uncovered requirements have not materialized.” Chang added the firm has changed its view and expects utilities to focus their buying in the spot market “until they are no longer rewarded with low prices for doing so.”
That being said, Chang wrote that Cantor Fitzgerald believes a “violent increase” for the uranium price is in the cards, but that large global uncovered requirements are large and there cannot be enough available spot market inventory to cover the pending demand.
“In the current low price environment we believe a significant number of uranium mines will shut down once the high priced contracts that have been keeping them operational roll off,” the report reads.
For the foreseeable future, Cantor Fitzgerald expects the uranium price to remain somewhere around $40 per pound due to forecast production shutdowns based on the expiration of long term contracts.
On the other hand, the firm also projected uranium prices of $70 per pound based on the assumption that uranium producers will produce at their forecast production levels, all new uranium projects will start on time and exactly according to their ramp up forecasts.
With both scenarios in mind, however, Cantor Fitzgerald views the first scenario to be the most realistic as “it is unreasonable to assume producers will continue producing at a loss indefinitely.”

Learn to profit from the uranium market in 2020!

Read our free outlook report to learn how!

A long ways to go

However, not all analysts are projecting an upward swing for the uranium sector. The Economic Calendar reported in July that UBS analysts project the uranium spot price to close out 2020 at $30 per pound, down from its previous prediction of $37. Moving ahead to 2020, UBS changed its forecast to $32 per pound, down from $55.
UBS is projecting low uranium spot prices due to the fact that that Japanese reactor restarts have taken longer than expected, says the Economic Calendar.
Despite this, China currently has 34 nuclear power reactors in operation with 20 under construction, and more on the way, according to data from the World Nuclear Association.

Investing During the Pandemic

Discover what experts see coming for resources and commodities amidst the Coronavirus pandemic.

Stocks to watch

While the uranium sector remains bleak, a number of stocks have managed to hold ground during tough times. We looked at a few of the current top stocks within the sector.

  • CanAlaska Uranium (TSXV:CVV): CanAlaska has been exploring for uranium in the Athabasca Basin in Saskatchewan since 2004 and holds one of the largest land positions in the region making up 2.1 million acres. In addition to exploring for uranium, the company has also started exploring for diamonds on its 100 percent owned Alberta Diamond Project. Year-to-date, CanAlaska’s shares have increased 936.36 percent to $1.14;
  • Purepoint Uranium Group (TSXV:PTU): Purepoint Uranium currently operates the Smart Lake project in the Athabasca Basin under the terms of an agreement with Cameco (TSX:CCO) that allows them to acquire up to a 50 percent interest in the project. Year-to-date, Purepoint’s shares have increased 200 percent to $0.105; and
  • Mega Uranium (TSX:MGA): Year-to-date, shares of Mega Uranium have steadily increased 121.43 percent to reach $0.155. Currently, the company is focused on developing its projects in Australia.

Don’t forget to follow us @INN_Resource for real-time news updates!

Learn to profit from the uranium market in 2020!

Read our free outlook report to learn how!

This is an update to an article written in September 2020. Please scroll to the top for the most recent information.

The uranium price has trended downward since the 2020 Fukushima disaster, and has hovered below the $40 mark throughout 2020. However, there is a laundry list of major catalysts expected to help move the uranium price in the coming years, and many see a supply deficit in the cards by 2020.
As of September 17, the U3O8 spot price was sitting at US$37.25, unchanged from the previous week. And while the price has moved up only slightly in the past couple of months, analysts believe that’s set to change. With that in mind, the Investing News Network has put together uranium price forecasts from different experts to give investors an idea of what to expect.

Investing During the Pandemic

Discover what experts see coming for resources and commodities amidst the Coronavirus pandemic.

Uranium price forecast: Cantor Fitzgerald

When Cantor Fitzgerald released its Quarterly Commodity Outlook at the end of July, it noted that in Q2 2020, the uranium spot price came in under its estimate of US$40 per pound, instead hitting US$36.79. At the time, Cantor Fitzgerald Senior Analyst Rob Chang explained that the lower price was mainly due to utilities refraining from both signing contracts and buying.
“The buyers themselves know the prices are going to be a lot higher and they fully see that in the future they are going to pay a lot more — double, maybe even triple. But it is a bureaucracy, they need to get approvals from others, and it’s difficult to justify to the senior board to lock in a contract at US$45, US$50, US$60 when you can just as easily walk into the market right now and buy it for US$36. And they have been right so far,” Chang said, adding that the premise that ample inventory is readily available has also kept buying at bay.
While the firm’s Q2 prediction missed the mark slightly, Cantor Fitzgerald is still firm on its spot price predictions for the next three years, and expects to see the price at US$50 in 2020, US$60 in 2020 and US$70 in 2020. Chang said he expects it will be sales contracts from utilities that move the price in the short term.
“At some point, someone is going to have to jump in and buy and others will do the same — the spot market is so thin that it will show. Just like last year, when a few buyers came in it went from US$28 to the US$40 range really quickly,” he said.

Investing During the Pandemic

Discover what experts see coming for resources and commodities amidst the Coronavirus pandemic.

Uranium price forecast: Dundee Capital Markets

Dundee Capital Markets has a slightly higher outlook for the spot price in 2020, and expects it to reach US$55 per pound. As for 2020 and 2020, the firm expects the price to flatline at $65 per pound. In regards to term volume, which according to Dundee Senior Analyst David Talbot is anything contracted for longer than 12 months, contracts made in 2020 should fall in the $65-per-pound range; for 2020, the firm expects term volume to be $58 per pound.
“Following a contraction below the $10 per pound historical average when spot hit US$44.00 per pound with term flat at US$45.00, the term market reacted with term prices rising to US$49 per pound. Term hasn’t shifted from that level since although spot has settled to reflect a widening of the spread,” Talbot said in a research note. “Term activity has been somewhat slow this year but soon to-be US ISR producer Peninsula Energy (ASX:PEN) negotiated contracts at US$49 per pound in December 2020. With only 80 million pounds term volume over the past two years, we believe that contracting must accelerate to offset the nearly 360 million pounds of uranium used in nuclear reactors over the same period. The 2020-17-18 period sees a tremendous increase in uncovered demand.”
Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article.
Related reading:
Major Catalysts Expected to Move the Uranium Price
Athabasca Basin Uranium Companies to Watch

Why Uranium Prices Are Rising, and How You Can Profit

By Abby Higgs , Staff Writer , Money Morning • April 30, 2020

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Demo Account!
    Free Trading Education!
    Sign-up Bonus!

  • Binomo
    Binomo

    Trustful Broker!

Start the conversation

Or to contact Money Morning Customer Service, click here.

Right now, when investors think about the energy sector they most often think of oil, natural gas, and coal. But there’s a major player in the industry that’s back on the rise after a significant fall: uranium.

Currently, uranium prices are creeping upwards after bottoming out mid-year 2020. As a clean, base load power at low cost to billions of people, uranium is a hard-asset must-have for investors’ portfolios.

Take a look at why uranium prices are ready to skyrocket…

Uranium Prices on the Rise

In 2020, following the 9.0 magnitude undersea earthquake off the coast of Japan that disabled the Fukushima nuclear reactor power plant, uranium prices fell about 60%. This started a four-year bearish cycle that just recently began to slow its course.

In mid-2020, spot prices finally bottomed out near $28. They’ve since gained 40%, up to $38.50.

The reason for this rise is there’s a new era of uranium consumption starting in the world…

According to Money Morning Resource Specialist Peter Krauth, “Given the burgeoning demand for, and limited supply of, this crucial component of the energy mix, it’s time for a closer look at uranium.”

Krauth said worldwide annual uranium consumption is forecast to jump from 155 million pounds to about 230 million pounds within nine years. The United States is the largest consumer of uranium in the world, requiring more than 50 million pounds per year, yet producing only 4.7 million pounds domestically. China consumes 19 million pounds per year, but that’s expected to reach 73 million by 2030.

That’s why there are global uranium negotiations happening right now.

Thanks to a deal struck mid-April 2020 between Indian Prime Minister Narendra Modi and Canada, the first nuclear contract binding these two nations together in four decades came to fruition. This contract specifically outlined a five-year 3,000 tonne agreement allowing India to buy uranium in order to power its nuclear reactors.

“This may just be a foreshadowing of what’s to come,” said Krauth. “Despite the terrible Japanese Fukushima disaster, globally there are hundreds of new reactors either under construction or in planning stages.”

The most important takeaway for investors: There are ways to profit from higher uranium prices – here’s where to look…

What’s behind the red-hot uranium boom

Supply crunch, demand from nuclear power plants push metal prices higher; NYMEX getting in on the action.

NEW YORK (CNNMoney.com) — Uranium is hot, and it’s not just because of its protons and neutrons.

Two years ago the metal, used mostly to power nuclear reactors, traded around $20 a pound, according to the research firm Ux Consulting Co., which tracks uranium prices in the market by surveying buyers and sellers each week.

Special Report full coverage
  • America’s cheapest gas is in this town
  • Summer drivers to get a break on gas
  • Why gas prices are likely to keep climbing
  • You’ll pay a little less for gas this summer
  • Expect relief from record February gas prices
  • Why gas prices are rising

Last week prices hit $113 a pound and the pace of increase isn’t slowing but rather accelerating. Last week’s prices were up 19 percent jump from the prior week – the biggest weekly gain since Ux began tracking prices back in 1968.

“You haven’t had a down week since 2003,” said Christopher Ruppel, a senior geopolitical analyst with the energy consulting firm John S. Herold.

The runup is due partly to basic economics.

While demand for the metal has been steady, it’s expected to surge as a host of new nuclear plants come online in coming years. And supplies are running short, thanks to severe flooding at two of the world’s biggest mines and a dwindling amount of element number 92 that can be salvaged from old nuclear warheads.

And, oh yeah, speculators, did we mention them? There’s been a fair amount of interest from hedge funds, according to Ruppel, who said the funds have exploited legal channels, once used only by utilities and suppliers, to win ownership rights to uranium stored in repositories in North America and Europe.

Until now, investors interested in the uranium boom were limited to buying a handful of funds in Canada and England that purchase the metal, or buying stock in outfits that mine uranium such as Australia’s Rio Tinto (Charts) or Canada’s Cameco (Charts).

But on Monday the New York Mercantile Exchange said it would begin offering a uranium futures contract. The contract, for 250 pounds of the metal, begins trading May 7, and will be available via the electronic trading platforms in most brokerages.

A NYMEX spokeswoman said there are no current plans to offer a half-sized contract similar to the half-sized crude oil contract targeted to retail investors.

For users of uranium, like utilities, trading on the NYMEX is probably good news.

“Trying to figure out uranium supply and demand is a black box,” said Peter Tertzakian, chief energy economist at ARC Financial, a private equity firm based in Calgary, Alberta.

Tertzakian said public trading of the metal should result in more public interest, which should spark more research into the market and a greater degree of clarity in how prices are set.

“There’s only one (group tracking) prices in what has become a multi-billion dollar market,” he said.

A renewed interest in nuclear power, sparked by global warming fears and surging electricity use in the developing world, is the main driver behind the expected boost in demand.

Worldwide, there are 28 new nuclear reactors being built, 64 on the drawing boards and another 158 proposed, according to John S. Herold’s Ruppel. If all those reactors get built, it would mean 57 percent more reactors from the 435 in operation.

Factor in supplies that aren’t growing, but actually declining, partly due to flooding at two of the world’s largest mines. Last October workers at Canada’s Cigar Lake mine, half owned by Cameco, mistakenly hit water, flooding the mine. Ruppel said production at the unfinished mine will now be delayed another two years and won’t come online until 2020.

And heavy rains this spring flooded a big mine owned by Energy Resources of Australia that could result in a production loss of 35 percent at the mine, Ruppel said.

But that’s only half the production problem. The other half is that the world has been relying on old nuclear warheads for enriched uranium, and that supply is running out.

Ruppel said in 2006 the world consumed 180 million pounds of uranium, but it only produced 100 million pounds. The rest came from old weapons, mostly Russian. At current supply and demand levels those old stockpiles will be eroded by 2020.

“Without significant new production coming online, you’re going to have a shortfall,” said Ruppel.

Mining activity is growing rapidly, especially from smaller companies, but developing a uranium mine takes a long time, 10 years or more.

For all the gains, the runup in uranium prices is unlikely to have a big impact on the price of electricity. That’s because unlike coal or natural gas, most of the costs associated with nuclear power come from building the plant, not the fuel used.

Ruppel said fuels costs account for only about 28 percent of a nuclear plant’s operating expenses. Still, “if prices don’t moderate, nuclear plants will be somewhat less profitable,” he said.

Please click “I am not a robot” to continue

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.

If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Demo Account!
    Free Trading Education!
    Sign-up Bonus!

  • Binomo
    Binomo

    Trustful Broker!

Like this post? Please share to your friends:
Binary Options Wiki
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: