Earlier this year, the Global X Uranium ETF (NYSEARCA:URA), which tracks uranium miners, surged, but the good times did not last long. By the middle of February, URA was slumping and on its way to giving back the gains it accrued in January.
Somewhat quietly, the uranium ETF is higher by 6.6% over the past week and some analysts are forecasting higher prices for the commodity. As is the case with other mining equities stocks and ETFs, rare are the occasions when these investments rise while the material they mine loses value. Some technicians view $15 as critical for URA.
Earlier this year, uranium prices saw temporary relief after U.S. and five other permanent United Nations Security Council members backed plans for Iran to receive a 116 metric tons of natural uranium, with a huge shipment of natural uranium from Russia.
“RBC Capital Markets has given some hope for uranium bulls that better days are ahead in its third quarter mining and metals outlook. While the short term looks tough, production deficits could boost prices over coming years,” reports Robert Guy for Barron’s.
Another ETF for accessing the nuclear trade is the VanEck Vectors Uranium+Nuclear Energy ETF (NYSEARCA:NLR), which takes a broader approach, including exposure to large and more stable utilities.
Uranium remains controversial even six years after the 2011 Fukushima disaster in Japan. In response to the fallout, anti-nuclear activists have aggressively petitioned courts to block restarting the plants. Japanese Prime Minister Shinzo Abe has also been a vocal nuclear power proponent, arguing that atomic power, which generated almost one-third of Japan’s electricity pre-Fukushima, helps diminish the country’s reliance on expensive fossil fuel imports.
Related: Uranium ETF is Getting Radioactive Again
“We forecast uranium prices will increase significantly through our forecast period due to cost curve economics, declining contract coverage, and required incentive price for new mine supply. Near-term, we think prices are relatively range-bound near $20-25/lb U3O8 in 2017- 2018. As cost curve economics take effect and contract coverage declines in 2019-2021, we forecast an increase to $30-40/lb. Post-2021, we believe the market should move towards a deficit and new mine supply may be required, resulting in uranium prices at $50/lb in 2022, $60/lb in 2023-2025 and $70/lb in 2026-2028. Longer-term, we forecast $65/lb based on the marginal cost of production,” according to an RBC note posted by Barron’s.
For more articles on uranium ETFs, visit our Uranium category.