What happened
After heading for the skies yesterday, uranium stocks fell back to the ground on Jan. 6 and dropped steeply. After slipping more than 10% each in early-morning trading, here's how the top uranium stocks losers were faring as of 1:20 p.m. ET:
- Energy Fuels (UUUU +4.68%): Down 9%.
- Denison Mines (DNN +3.81%): Down 9.5%.
- Uranium Royalty (UROY +3.65%): Down 7.4%.
- Ur-Energy (URG +1.41%): Down 5%.
Blame Kazakhstan, yet again.
So what
Uranium stocks surged on Jan. 5 after anti-fuel-price protests in Kazakhstan turned violent. Things spiraled out of control as the country's president resigned, the internet was shut down, and an emergency was declared in some parts of the country. The reason: Fuel prices doubled the very first day of the new year after Kazakhstan's government lifted price controls, triggering mass protests and clashes across the nation. The country hasn't seen anything like this since it gained independence nearly three decades ago.
Image source: Getty Images.
So what does this political unrest in Kazakhstan have to do with uranium stocks, you may ask? The thing is, Kazakhstan is not only an oil-rich country but also the world's largest producer and supplier of uranium, accounting for 43% of the world's uranium supply in 2019, according to the World Nuclear Association.
A potential disruption in the supply of uranium from Kazakhstan and consequential rise in uranium prices, therefore, triggered frenzied buying activity in the uranium markets on Jan. 5. Trading Economics estimates more than one million pounds of uranium were traded in the spot market, and uranium prices jumped nearly 8% on Jan. 5, taking uranium stocks along for the ride.
Why then did uranium stocks lose momentum today? There are a couple of reasons.
First, Kazakhstan's government has reportedly restored caps on fuel prices for now to help restore normalcy. Second, and most importantly, state-controlled Kazatomprom, which is also the world's largest uranium mining company, told Bloomberg that the unrest in the nation hasn't affected its production so far and that the company will meet all its delivery commitments. The world's second largest uranium producer Cameco (CCJ +6.11%) echoed the sentiment and said production at Inkai mine, which Cameco co-owns with Kazatomprom, was on track, according to S&P Global Platts.
In short, the same fears that lifted uranium prices and stocks higher yesterday don't seem to hold much water anymore.
Now what
I urged investors yesterday to use caution and not get too excited as the euphoria could be short-lived given that fears of a disruption in supply were just that -- fears and speculation. Kazatomprom and Cameco confirmed that today, which explains why uranium stocks lost ground as swiftly as they exploded.
