In what amounts to a vexing scenario, the Global X Uranium ETF (NYSEArca: URA), which tracks uranium miners, is up more than 4% over the past month and more than 8% year-to-date even as uranium prices slide.
With nuclear energy industry looking brighter, uranium demand is expected to rise. According to the World Nuclear Association, the number of new nuclear plants due to go online this year and in the next three years is expected to total around 40, and more are planned in the years ahead, mostly in Asia, writes Lawrence Williams for Mineweb.
Last week, Cameco (NYSE: CCJ), one of the most widely followed uranium stocks, posted a surprise first-quarter loss.
“After adjustments, the company reported a loss of 2 Canadian cents per share, compared with a year-ago profit of 18 Canadian cents per share. Revenue fell 30 percent to C$408 million. ($1 = C$1.25),” according to Reuters.
Uranium remains controversial even five 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.
Nevertheless, the court’s response may reflect more favorable opinions in some areas.
[related_stories]Although URA has been rising this year, there are short-term factors hampering the uranium space.
“Although the long-term uranium market fundamentals are good, as the global nuclear power generation capacity is about to grow by nearly 50% over the next twenty years, the short term weakness doesn’t seem to be ending anytime soon. There are still only two nuclear reactors operating in Japan. The Takahama 3 reactor had been restarted in February but it was idled on March 10, due to the court injunction,” according to a Seeking Alpha analysis of URA.
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.
Some observers warn that current uranium prices are not high enough to boost output from existing mines, so the gains in the uranium miners space may be short-term unless the fundamentals change.
“Due to the weak demand, the uranium market is in an oversupply. Also some governments help to grow the uranium glut. For example the U.S. department of Energy sells more than 5 million lb of uranium from its excessive inventories per year, according to UPA (the Uranium Producers of America),” adds Seeking Alpha.
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Global X Uranium ETF
