Uranium stocks took off on Jan. 5, with stocks across the industry surging by double-digit percentages in early-morning trading to extend their gains this week. Here's how some of the top-performing uranium stocks were faring as of 1:43 p.m. ET Wednesday.
- Cameco (CCJ 2.25%): Up 8.1%.
- Uranium Energy (UEC 1.41%): Up 7.5%
- NexGen Energy (NXE 1.87%): Up 12.9%.
- Ur-Energy (URG 2.23%): Up 5.6%.
- Energy Fuels (UUUU 4.03%): Up 7.5%.
- Denison Mines (DNN 2.94%): Up 11.4%.
Blame political unrest in the world's largest uranium-producing country.
Kazakhstan, in Central Asia, has around 12% of the world's uranium resources but accounted for 43% of the global uranium supply in 2019, according to the World Nuclear Association. The nation produces and supplies nearly all of its uranium through the government-owned company, Kazatomprom, the world's largest uranium-producing company.
Any instability in Kazakhstan that could jeopardize economic growth, therefore, is bound to send ripples across key sectors. That's exactly what's happening within the uranium industry right now as fears of a disruption in supply has gripped the market, right when demand for uranium was recovering after years of lagging.
It all started when the Kazakhstan government lifted price controls over liquefied petroleum gas this year. As a result, fuel prices doubled the very first day of 2022, triggering mass protests across the nation.
The protests have now turned violent, and the unrest has escalated. Kazakhstan's president resigned on Jan. 4, and the country reportedly cut off internet access on Jan. 5. It appears to be a full-blown political crisis in the making, which could hit global supply of uranium and drive prices higher. Not surprisingly, investors wasted no time and piled onto uranium stocks today.
As it is, Kazatomprom, as well as Cameco, have cut back production of uranium in recent years to help support falling uranium prices. Meanwhile, demand for uranium soared in 2021 after the launch of the world's largest physical uranium exchange-traded fund, the Sprott Physical Uranium Trust Fund (SRUU.F -0.26%), spurred spot demand. Uranium prices shot through the roof, but neither Kazatomprom nor Cameco have announced any intention yet to boost supply.
The uranium industry already has a lot going in its favor right now. The Sprott fund is purchasing hefty amounts of uranium, and more world leaders are recognizing the viability of nuclear power, which uses uranium as key fuel as an alternative source of energy. For example, barely days ago, the European Commission proposed reclassifying uranium as a source of clean energy and subsidizing it. The developments in Kazakhstan, although unfortunate, are therefore a cherry on top for the uranium markets right now.
Investors should use caution, as geo-political issues can steer in unexpected directions. For now, the market is bidding uranium stocks higher purely on speculation. Whether global uranium supply will be hit at all and by how much is anyone's guess. Also, Kazakhstan will strive to revive normalcy, as it isn't just a major exporter of uranium, but also an important oil hub.
The point is, this euphoria in uranium stocks might be short-lived, so it's better to focus on the longer-term prospects of top uranium stocks right now.