Is it Safe to Bet on Uranium?

Over the past week, global uranium prices have risen by more than about 8% amid protests and unrest in Kazakhstan, the world's largest producer of nuclear fuel. Although there is currently no shortage of supply, market participants are assuming that there are prerequisites for this.

What is the likelihood of the world facing a uranium shortage? Quite low, as now the operations of both Kazatomprom, the largest producer in the country, and its closest competitors seem not to have been distorted. Therefore, the recent spike in volatility is nothing more than speculation.

What investors need to care about - is the outlook for uranium. In this context, according to the World Nuclear Association, there are more than 50 reactors under construction worldwide and there could be more than 300 shortly. The major share of these projects is in Asia, but even in North America, a kind of nuclear renaissance is possible.

In Europe, they are also looking to "boost" nuclear power - on January 1 the European Commission sent a draft regulation to EU member states. France, which generates most of its energy in nuclear power plants, is rumored to have negotiated intensively behind the scenes with other EU members to convince them to support this position.

If the peaceful atom can be classified as green energy, investments in the sector could rise substantially. However, to receive the green light, nuclear power plants must guarantee the disposal of radioactive waste. Germany would also have to be persuaded to change its views on nuclear power. Three nuclear power plants have recently been shut down in Germany. The remaining plants are due to shut down within a year. It should be noted that Spain also rejected Brussels’ plan to classify nuclear power and natural gas as green energy. Instead, the ministry noted, Spain defends putting nuclear energy and natural gas plants in “a yellow, intermediate category due to their role in the transition, but without being considered green.”

Despite the good perspectives, it is crucial to remember the investment basics: buy at a low price and sell at a higher price. Thus, trading securities related to the uranium industry might be a risky thing to do unless you are ready to wait for months if not years…