Reduced Supply May Put a Floor Under Uranium Prices

Mar. 12, 2020

While uranium prices plummeted from a peak of $137/lb. during 2007 to around $20/lb. in November 2016, that alone is not enough to call a market bottom. However, a substantial reduction in supply appears to support the case that uranium prices have bottomed and may be poised to advance.

Supply Is Contracting
Supply continued to expand while prices were declining through 2016.

Primary Supply
Primary supply refers to uranium that is extracted directly from the ground.

Aggregate Supply Started Declining in 2017
However, since 2016, miner, in aggregate, have been cutting production. This has led to lower primary uranium supply as the above chart highlights.

These cuts began to reduce the overall supply of uranium when Cameco, a large Canadian uranium miner, closed two of its mines in Canada.

Further Spurred by Large Production Cuts at Kazatomprom
During December 2017, Kazatomprom, the largest uranium miner in the world, announced that it would reduce uranium production by 20% over three years beginning in January 2018. According to the Financial Times, the company’s cuts are equivalent to around 7.5% of total global supply.[1] The company has not disclosed any production plans past 2021. However, it noted that it “does not expect a return to full production until a sustained market recovery is evident and demand and supply conditions signal a need for more uranium.”[2]

Summary
A substantial decrease in supply underpins our case for calling November 2016 the bottom of the market for uranium prices. With reduced supply, additional demand for uranium has the potential to create a bull market for uranium.

The North Shore Global Uranium Mining ETF (URNM)
The North Shore Global Uranium Mining ETF (URNM) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the North Shore Global Uranium Mining Index (the index).

By seeking to replicate the index, URNM looks to provide investors with access to both miners and holders of uranium.


[1] Sanderson, Henry, Kazatomprom to Slash Uranium Output by 20%, Financial Times, 12/4/17
[2] Kazatomprom Prolongs Uranium Production Cuts, World Nuclear News, 8/20/19

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