Green Shoots in the Uranium Market?

The uranium spot price is near a nine-year low. The recent plunge from the mid-$30s per pound to about $28 per pound was a real shocker to many. Are we finally seeing some green shoots, evidence a rebound could be coming?

Jul 9, 2014 at 3:18PM

I've followed uranium companies, both large and small, for the past six years. Rarely has market sentiment been so poor. Understandably, with the uranium spot price near a nine-year low, at about $28/pound, moods among industry participants are depressed. While I can't say that an imminent spike in the spot price is in the cards, even a modest move back above $30/pound could spark a decent rally in uranium stocks.

Investors need to remember that in the months leading up to Japan's terrible Fukushima accident in 2011, long-term uranium prices were in the low $70s per pound. The long-term price takes into consideration operating reactors plus future reactors under construction and planned and proposed reactors. With all of Japan's roughly 50 reactors still offline, it's easy to understand why the spot price is as depressed as the uranium producers themselves: too much supply, and too little demand. 

Utility contracting has to pick up again by next year
Utilities that buy uranium have not been in the market for the past 12-24 months in typical fashion. With the oversupply of uranium, utilities have not felt compelled to sign long-term contracts. However, all of that will likely change by next year. Utilities need to lock in some additional supply for 2016-17, but many are really wide open for 2018 and beyond -- perhaps more wide open just four years out then they've ever been. When long-term contracting activity picks up again, and it must, producers should be able to regain some degree of pricing power. Clearly, the spot price of $28/pound is not a realistic market indicator. 

Just as the spot price collapsed by 20% to $28/pound fairly quickly on very little transactional volume, I believe the price could bounce back to the $30s/pound without much trouble at all. More important will be the long-term contract price, which currently stands at $45/pound. Even a modest uptick to $50/pound, perhaps by the end of 2014, would be a positive boost to overall sentiment.

Green shoots?
I mentioned green shoots in the title of this article. A growing list of supply being taken offline by companies like Paladin (NASDAQOTH:PALAF) and new mines by Cameco (NYSE:CCJ) and Areva (NASDAQOTH:ARVCF) being either temporarily delayed or pretty much mothballed. For example, Cameco announced it is not proceeding with permitting its Millennium project, which hosts 46.8 million pounds. Both Areva and Paladin have large mines in Africa on care and maintenance. 

Even low-cost In-Situ Recovery companies in the U.S. are curtailing production. Companies like Uranium Energy Corp (NYSEMKT:UEC), Uranerz, and Ur-Energy (NYSEMKT:URG). Why operate at ultra-thin operating margins? It's prudent for these companies, that don't have giant sized resources, to keep the pounds in the ground until higher uranium prices return. Note, Ur-Energy and Uranerz are still producing at reduced capacity to fulfill customer contracts that were signed when the uranium price was higher.  

The green shoot I want to highlight is that finally, after 12-18 months of market pundits talking about reactor restarts in Japan -- finally, I think we could see some. To be fair, it won't be a lot of restarts, but maybe 2-6 by year end. Some pundits are still calling for 6-12 restarts.

Bottom line
Investors may want to do some homework on uranium stocks for possible buying opportunities in coming months. Talk of Japanese restarts has been around so long that it's a lot like the boy who cried wolf. However, green shoots may be popping up.

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven’t heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America’s greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, “The IRS Is Daring You to Make This Investment Now!,” and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Peter Epstein has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers