What happened
Shares of uranium mining companies Centrus Energy (LEU 2.42%), Ur-Energy (URG +0.94%), and Uranium Energy (UEC 4.83%) all jumped Monday in the wake of governments renewing their support for the nuclear power industry. Specifically, Centrus rallied by 19.4%, Ur-Energy stock gained 10.5%, and Uranium Energy shares rose by 10.9% after the U.S. House of Representatives passed an infrastructure bill that supports new investments in nuclear power. Simultaneously, the industry is being buoyed by last week's COP26 global climate, which highlighted nuclear power as part of the solution to the world's growing climate change crisis.
So what
Don't look for any commentary about either new tailwind from any of these three uranium suppliers; you won't find it. This surge is strictly the result of traders coming to their own conclusions regarding nuclear energy's place in a future that can't yet be fully powered by green renewable sources like solar or wind.
Of course, those conclusions certainly hold plenty of water.
Image source: Getty Images.
Late Friday, the U.S. House of Representatives passed a $1 trillion infrastructure bill that calls for (among many other things) fresh research into advanced reactors that could modernize America's nuclear power production -- steady streams of baseload electricity that greener alternatives are not yet ready to produce. The bill has been delivered to President Joe Biden, who is expected to sign it this week. The legislation calls for $6 billion worth of nuclear power support, although it's not a stretch to suggest that the Biden White House and the Democratic majority in the House of Representatives will continue to support greater use of any energy source that isn't a greenhouse-gas-emitting fossil fuel.
Separately, but almost simultaneously, last week's climate-change conference COP26 (Conference of the Parties) held in Glasgow, Scotland, also reintroduced nuclear power as a legitimate contributor of power production that will help the world wean itself off fossil fuels. As U.S. Energy Secretary Jennifer Granholm commented at an event facilitated by the International Atomic Energy Agency held in conjunction with COP 26, the United States is "all in on nuclear" as part of its plan to cut greenhouse gas emissions.
Now what
The knee-jerk buying of Centrus, Ur-Energy, and Uranium Energy makes sense in light of the developments that have just taken shape over the course of the past few days. But none of this should be much of a surprise to investors who have been following this story. Uranium Energy shares were already up 125% from August's lows before Monday's surge, while Ur-Energy had rallied by more than 80% over the same time frame. Centrus Energy stock had nearly tripled in value since August, while prices for uranium itself were up more than 50%.
The buyers got it right, so to speak, but their anticipation of this convergence of events may also be an as-good-as-it-gets moment -- the sort of scenario that gave rise to the adage "buy the rumor, sell the news."
This may not be such a moment, to be clear. But there's enough doubt that any further bullish catalysts lie in the immediate future that the smart-money move right now would be to steer clear for a few days rather than jump on the proverbial bandwagon. Most of these recent price run-ups are driven by speculation, which can deflate just as quickly and easily as it inflates.
