Uranium Maintains Momentum Amid High Demand, Low Supply

Uranium has been one of the top-performing commodities this year as the use of nuclear power starts to gain more acceptance, increasing demand for the metal while supply remains constrained.

More such projects are starting to pop up as the world looks for alternative energy sources. In effect, this is causing the metal’s market to grow exponentially and will continue to do so, offering tremendous growth potential despite supply chain complexities and geopolitical factors.

“The nuclear comeback has jolted the $10 billion uranium market after a decade-long bust that deterred mining companies from producing the fuel,” reported the Wall Street Journal. “There are pinch points along the complex supply chain, from mining to enrichment. Some worry that the West will eventually sanction fuel from Russia, the world’s largest enricher of uranium.”

An additional catalyst for higher prices is the West African country of Niger, which accounts for about 5% of the global uranium supply. A recent coup could potentially cause supply disruptions, further pushing the price of the metal even higher.

“Benchmark prices have jumped 30% this year to about $62 a pound, according to market-data firm UxC, making uranium one of the top-performing commodities,” the WSJ report added. “Barring a surge last year after Russia’s invasion of Ukraine, that is their highest level since 2011, when the Fukushima meltdowns led to the shutdown of dozens of reactors.”

A snapshot of the metal’s strength this year can be encapsulated in the World Uranium Index, which is up almost 30% for the year.

^WUA Chart

^WUA data by YCharts

Capitalize on Uranium Miners

As the use of the metal  continues to increase in the near- and long-term horizon, one play is to capitalize on strength in miners. This is available in the Sprott Uranium Miners ETF (URNM).

“The market is now needing new production again, but the lead times for that to happen will not occur quickly or easily,” said Amir Adnani, chief executive of Texas-based Uranium Energy.

With its 0.83% expense ratio, URNM tracks the North Shore Global Uranium Mining Index. This index follows the performance of companies that devote at least 50% of their assets to the industry, which may include mining, exploration, development, and production of uranium, or holding physical uranium, owning royalties, or engaging in other, non-mining activities that support the mining industry.

For added global diversity, the fund offers exposure to various countries with companies involved in the metal’s  mining. Canadian companies comprise over 50% of the fund, but it also includes holdings in other countries such as Hong Kong, the United Kingdom, Kazakhstan, and Australia.

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