Forecasts showed an additional 20 million pounds of uranium production for 2018…without buyers. As you can imagine, the price of uranium has fallen.
It hit its lowest price in October 2016 at $18.75 per pound. This hit a 13-year low price.
The downward trend began in 2011. The price of uranium peaked at $72.50 per pound in January 2011. It has fallen steadily since then, down a total of 74%.
This is a shocking result for an energy source that many considered a “green” bailout from hydrocarbons just a few years ago. Nuclear power creates safe, carbon-free energy.
The problem is that it can cause huge disasters. This is what we discovered when the Fukushima disaster hit Japan.
The disappearance of nuclear energy
An earthquake and tsunami damaged the Fukushima Daiichi nuclear power plant in March 2011. The earthquake damaged a reactor. Then the tsunami flooded the area, destroying vital backup generators.
Without the backup power, cooling water could not enter the plant. This caused the reaction to runaway, to collapse – the greatest fear for all nuclear power plant operators.
A series of human errors compounded the damage. The operator, Tokyo Electric Power Company, was totally unprepared for the situation.
The result killed the nuclear power industry.
Fukushima turned the world against nuclear energy. Germany shut down all its reactors in response. The demand for uranium fell and the price of uranium collapsed.
This eventually led the major uranium producer Cameco Corp. to cut production in early November 2017. The company’s profits fell and fell. It struggled to maintain profitability. It finally announced that it would suspend operations at its flagship McArthur River mine for 10 months.
Cameco’s decision reduced the surplus to just 5 million pounds…then the unthinkable happened: the world’s largest uranium producer followed suit. Kazakhstan’s uranium mining company, Kazatomprom, has cut production by 20% over the next three years.
The result could be a huge bull market in uranium.
The price of uranium and a boon for uranium producers
Shares of Uranium Participation Corp., which holds physical uranium for investment purposes, soared. Shares are up 30% in just a month and a half.
Shares of uranium companies also surged. However, this is only the beginning. Analysts who cover the uranium industry estimate that these cuts could add $30 a pound to the price of uranium. This is more than double the current spot price.
For uranium producers, this will be a boon. Companies like Cameco and Ur-Energy Inc. will see their revenues and profits soar.
This sounds like great news for the uranium industry. It’s a story we’ll continue to watch in 2018.
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