What happened
After a heady rally in recent weeks, uranium stocks across the board plunged on Monday. Here are some of the worst-performing uranium stocks as of 3:37 p.m. ET on March 14:
- Denison Mines (DNN 1.73%): Down 10.5%.
- Energy Fuels (UUUU 1.87%): Down 13.1%.
- Ur-Energy (URG 2.07%): Down 10.6%.
Strange as it may sound, uranium prices hovered around 10-year highs even as these stocks crashed. So what gives?
Fears.
So what
Uranium stocks have been on fire ever since Russia invaded Ukraine in late February and sparked fears of a disruption in the supply of uranium, a key fuel used to power nuclear reactors. Russian uranium is cheap, and the U.S. therefore depends heavily on uranium imports from Russia to meet demand for electricity, almost 20% of which is generated from nuclear energy.
Last week, Russia banned exports of more than 200 products. Although it didn't mention uranium, the ban has stoked fears. Meanwhile, prices of oil and gas have reached for the skies in recent weeks, prompting utilities to look for alternative sources of fuel like nuclear energy. The surge in fossil fuels, in fact, has brought nuclear power into the spotlight, what with several nations around the globe planning to boost nuclear power resources to secure future energy supply.
Image source: Getty Images.
The U.K., for example, is planning to extend the life of a nuclear by 20 years, and Europe's first nuclear plant to open in 15 years started production on March 12.
All of these factors have combined to send uranium prices to highs of $60 per pound, according to TradingEconomics.com. Uranium last traded at this level in 2011 before the deadly Fukushima Daiichi nuclear disaster in March that year practically shut down the uranium industry.
So why did uranium stocks plunge on Monday?
The biggest reason uranium prices have soared lately – oil and gas prices -- didn't seem to hold water on Monday.
Oil and gas prices reversed course on Monday and fell steeply as negotiations between Russia and Ukraine reportedly gathered steam and production from the world's largest oil cartel rose in February after several months. Fresh lockdowns in China, a key oil importer, further fueled fears of a potential slowdown in demand.
Now what
So far, investors in uranium stocks were betting on higher uranium prices, which in turn have mainly risen on fears of an imbalance in demand and supply. Yet, it's still a speculative bet as eventually, it's the long-term prospects of nuclear energy, and therefore uranium, that will decide which way uranium prices are headed.
That speculation also means greater volatility in uranium stocks, especially young companies like Denison Mines, Ur-Energy, and Energy Fuels that are still exploring and developing mines and may have little to gain from the present surge in uranium prices.
