What happened
What went up, just came back down again.
Three weeks ago, a strong rebound in the price of uranium metal for nuclear fuel helped lift the share prices of uranium mining stocks as much as 10%. Ultimately, uranium prices peaked just short of $53 a pound before falling back again. Today, uranium prices are back down below $48 -- and still falling. Strangely though, shares of uranium stocks including Uranium Energy (UEC -0.91%), Energy Fuels (UUUU -0.75%), and NexGen Energy (NXE -1.28%) are shrugging off this decline and continuing to power higher.
As of noon ET on Tuesday, Uranium Energy is up 5.3%, NexGen Energy is rising 5.9%, and Energy Fuels is leading the sector higher with a 6.3% gain. Why is that?
So what
Of the three, NexGen Energy is the only uranium stock with good stock-specific news today. In a press release this morning, NexGen announced it has submitted a draft environmental impact statement to the Saskatchewan Ministry of Environment and the Canadian Nuclear Safety Commission, moving its Rook I Project uranium mine one step closer to opening.
This is an incremental positive for NexGen, but doesn't explain why the other uranium stocks are going up beside it.
To find the answer to that question, you need to look a little farther out -- to Europe, in fact, where over the weekend Austria, Germany, and the Netherlands all announced they are lifting restrictions on burning coal to produce electricity. All three of these nations, by the way, are party to the Paris Agreement to reduce carbon emissions from the burning of fuels such as coal. None of the three is a fan of the fuel. But all three of these countries are feeling the crunch of Russia's announcement that it will further cut natural gas exports to Europe in retaliation for economic sanctions punishing its invasion of Ukraine this year.
Now what
What does burning coal in Europe have to do with rising uranium stock prices in North America? Simply this: Europe needs power. In recent years, it has depended on Russian natural gas to provide much of its power, but if that fuel source goes away, the power needs still remain.
One way to generate the power Europe needs is by reopening, or expanding operations at existing coal plants, but that's anathema to European environmentalists. A second alternative -- perhaps now more palatable -- would be to build new nuclear power plants (or delay the shutdown of existing plants). In addition to being an alternative fuel source to gas, nuclear power plants don't emit carbon dioxide, so they're considered a greener fuel source than coal. Indeed, in February the European Commission officially added nuclear power to its list of green energy sources deserving government support.
This seems a more logical solution to a deficit of Russian gas in Europe. Granted, it takes longer to build a new nuclear plant than to reopen a shuttered coal plant -- so this story may take some time to play out and for uranium demand to rise and pull prices decisively higher over time. Given that time, though, the idea that Russia cutting off gas exports to Europe is good news for uranium stocks does make sense -- and these stocks do deserve to be going up today.
