Supply Constraints Should Give Uranium More Room to Run

Large players in uranium production could be facing issues that may lead to future supply constraints. That could give prices more room to run this year and next.

“A blistering rally in the price of uranium could have further to run, said investors, after Kazatomprom, the world’s largest producer of the radioactive material, warned of supply shortfalls in the coming two years,” the Financial Times reported. Kazatomprom recently warned “its production this year would be lower than expected because of shortages of sulphuric acid, which is essential to extract uranium from ore.”

The company also noted that 2025 production plans could also be affected by the shortage. This could mean uranium prices still offer investors an area of value given the long-term prospect for price increases.

“If limited access to sulphuric acid continues throughout this year, and should the company not succeed in catching up with the construction works schedule at the newly developed deposits in 2024, Kazatomprom’s 2025 production plan may also be affected,” the report said.

Market experts tracking uranium echo that same supply constraint sentiment. It might appear the amplified demand for nuclear energy means supply chains would eventually catch up. But that’s not the case.

“We are often asked whether the price of uranium achieving/nearing incentive pricing levels will unleash a powerful supply response that will inevitably end the bull market,” wrote John Ciampaglia, CEO of Sprott Asset Management. He noted “a lack of investment in the sector during the lost decade coupled with long development lead times for capital-intensive and complex projects.” He added that could in effect “translate into a slower-than-expected supply response.”

A Uranium Power Play on Miners

Increasing nuclear power demand offers opportunities for investors to capture growth. So a byproduct of this upside should also benefit mining. ETF investors looking to add growth as well as diversification into their portfolios can look at uranium miners. Sprott offers a pair of ETFs; one provides large-cap exposure and the other small-cap exposure.

For a large-cap focus with exposure to the biggest players in the metal’s mining space, consider the Sprott Uranium Miners ETF (URNM). The fund tracks the North Shore Global Uranium Mining Index. It invests in global firms that mine, develop, and produce the metal. It also invests in those that hold the physical metal or royalties from it.

For even higher growth potential, investors can tap into small-cap opportunities via the Sprott Junior Uranium Miners ETF (URNJ). It seeks to provide investment results that correspond generally to the total return performance of the Nasdaq Sprott Junior Uranium Miners Index. That index tracks mid-, small- and micro-cap companies in the metal’s mining business.

For more news, information, and analysis, visit the Gold/Silver/Critical Minerals Channel.