The uranium sector-specific exchange traded fund has been rallying as traders put the Fukushima disaster behind them, a potentially pro-nuclear U.S. president takes office and now increased demand coming from Iran all helped lift uranium prices from their lowest in over a decade.
The Global X Uranium ETF (NYSEArca: URA), which tracks uranium miners, surged 8.5% on Tuesday after rising 11.7% so far this month.
Uranium miners have been strengthening on rising uranium prices after the rare earth metal slipped to $18.0 per pound in November, its lowest since 2004, and now trades at around $20.25 per pound.
Uranium prices and miners jumped Tuesday 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.
The uranium market has also been steadily strengthening as negative sentiment surrounding the 2011 Fukushima disaster in Japan reverse. Japan has been paving way for its nuclear power plants to restart operations. Japanese Prime Minister Shinzo Abe has also been a vocal nuclear power proponent, arguing that atomic power, which contributed to almost one-third of Japan’s electricity pre-Fukushima, helps diminish the country’s reliance on expensive fossil fuel imports. The argument may be gaining momentum especially as crude oil prices rebound.
Meanwhile, many anticipate the incoming Donald Trump administration will also take a friendlier stance toward nuclear power. Nuclear industry proponents have also been lobbying to include nuclear energy into the renewables category under Obama’s clean air strategy that requires federal governments to acquire more renewable energy.
Nuclear energy is also expected to grow globally, especially in large countries like India and China where huge populations demand increased electricity usage. 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.
Moreover, while demand is increasing in emerging markets and other economies to support rising electricity needs, the industry faces a more long-term contracts set to expire, which may contributed to greater competition in the years ahead.
The Global X Uranium ETF tries to reflect the performance of the Solactive Global Uranium Total Return Index, which is comprised of global uranium miners, including a 21.5% tilt toward Cameco and 11.8% in NexGen Energy. Country weights include Canada 56.5%, Australia 16.0%, Hong Kong 8.0%, U.S. 7.9%, France 6.6% and China 4.9%.
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.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.