What happened
Uranium stocks rocketed on Monday, with most stocks in the industry surging by double-digit percentages in early morning trading. These were the top-performing uranium stocks as of market close Monday:
- Energy Fuels (UUUU 5.85%): Up 4.9% (12.2% at its peak).
- Uranium Energy (UEC 4.83%): Up 18.5%.
- Denison Mines (DNN 4.74%): Up 3.1% (10.4% at its peak).
These stocks have been rallying ever since Russia began its invasion of Ukraine in late February, but many thought the bull run would come to halt after the U.S. nuclear power industry's lobbying to not sanction uranium exports from Russia gathered steam last week.
That doesn't seem to be the case just yet. Moreover, Tesla CEO Elon Musk may deserve a bit of credit for the continued momentum pressing uranium stocks upward. The other driving factor was European natural gas prices hitting levels no one saw coming.
So what
Nuclear energy is a key source of power in many nations, and accounts for 20% of the electricity generated in the U.S. The U.S., though, relies extensively on Russia and its allies for the supply of uranium fuel to power its nuclear reactors, largely because Russian uranium is cheap. But with its invasion of Ukraine earning it steep economic sanctions, power companies in the U.S. are now pushing the White House to continue to exempt Russian uranium exports from sanctions.
Image source: Getty Images.
Even as the market is trying to figure out how such sanctions, if imposed, might affect uranium miners, the world is looking with renewed interest at nuclear as a reliable source of power, and Musk has emerged as a strong advocate.
On Sunday, Musk tweeted that nuclear "is vastly better for global warming than burning hydrocarbons for energy" and called for Europe to restart its nuclear power stations.
Hopefully, it is now extremely obvious that Europe should restart dormant nuclear power stations and increase power output of existing ones.
-- Elon Musk (@elonmusk) March 6, 2022
This is *critical* to national and international security.
There's some merit to that view -- European natural gas prices, after all, are hitting record highs even as I write this.
Indeed, that's a bit of an understatement.
European natural gas prices were range-bound in the neighborhood of 15 euros to 25 euros per megawatt-hour (MWh) for almost a decade. Prices touched a high of euro 345 per MWh Monday morning, or almost $600 per barrel of oil equivalent.
That's unheard of, and illustrates why it's becoming imperative for Europe to look toward alternative sources of energy. Barely three weeks ago, French President Emmanuel Macron announced plans to build 14 new nuclear reactors, with construction starting 2028. And last week, Germany said it's mulling moves to extend the lifespans of its existing nuclear reactors.
This could just be the beginning, and some investors don't want to miss any opportunity. They are therefore bidding up shares of any and all uranium companies, regardless of whether they're currently producing any uranium or not. Interest in the world's largest physical uranium exchange-traded fund -- the Sprott Physical Uranium Trust Fund (SRUU.F 1.55%) -- is equally high. Sprott's inventory of physical uranium hit 50 million pounds last week as the fund purchased huge amounts of the mineral to meet demand for its units.
OTC: SRUU.F
Key Data Points
Now what
As Russia is a major supplier of uranium to the world, the ongoing conflict has unsurprisingly made the nuclear power industry nervous. Uranium companies, on the other hand, see it as a blessing in disguise given the potential rise in demand for uranium.
That's already reflected in the price of uranium -- it has jumped nearly 20% in just the past two weeks and is hovering around its 10-year highs, according to TradingEconomics.com.
While it's anyone's guess how long this rally will last, investors in uranium stocks are making hay while the sun shines.
