Enthusiasm from individual traders is reshaping the market for nuclear fuel that generates a tenth of the world’s electricity and sending uranium-linked stocks higher.
After languishing for a decade after the Fukushima disaster led Japan and Germany to close nuclear reactors, spot uranium prices have shot up to $47.10 a pound from $32.25 at the start of August. They remain below their peak of $137 in 2007, according to price-tracker UxC LLC.
U.S.-listed shares of Canadian uranium company Cameco Corp. CCJ 0.57% have jumped more than 20% in October and almost doubled in 2021. Fellow Canadian miner Denison Mines Corp. DNN -1.08% has surged 25% this month and almost tripled this year. Texas-based Uranium Energy Corp. UEC 2.01% has climbed 17% in October.
Behind the rally: a run-up in uranium prices driven by individual traders, who have flocked to a new trust that gives a cheap and easy way of betting on the nuclear-fuel market. The Toronto-listed trust, run by Sprott Asset Management LP, has twice raised new cash from shareholders and snapped up uranium since the summer. Its shares have climbed to $12.49 as of Monday, up 49% from their inception in July.
Sprott’s purchases are helping to drain a uranium glut that accumulated after the 2011 Fukushima disaster. Stop-and-start buying by the trust has led to wild price swings with little or no justification based on fundamentals such as supply from mines or demand from utilities, traders say.
“These periods of intense volatility are going to become the norm,” said Hyder Ramatala, vice president for trading at UG USA, a unit of French nuclear-fuel company Orano SA. New vehicles for betting on uranium prices will push peaks in prices higher and troughs lower, he added.
Uranium stocks rose further this week after the world’s biggest producer, the Kazakh state-backed miner Kazatomprom, launched a uranium fund of its own in partnership with Kazakhstan’s central bank and Genchi Global Ltd., an Emirati investment firm. The fund will start with $50 million with plans to raise as much as $500 million more from institutional or private investors.
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The gyrations in uranium prices echo trading in stocks including AMC Entertainment Holdings Inc. and GameStop Corp. , which attracted ardent followings among individual day traders who gather on Reddit.
Even more so than struggling videogame stores and movie-theater chains, uranium is an unlikely candidate to be jolted by a gush of retail money. Utilities, miners, specialist traders and a clutch of hedge funds and banks including Goldman Sachs Group Inc. have long dominated the market.
Most U3O8, a form of lightly processed uranium that is yet to be enriched and made into fuel rods, is sold in long-term deals. Futures seldom change hands.
The sleepy market has picked up pace. Traders estimate that between 70 million and 90 million pounds will be traded in 2021, up from 50 million in a typical year.
The recent popularity of uranium among traders is helping to reduce a surplus of the material.
Photo: shamil zhumatov/Reuters
A big question for traders and investors is whether utilities, which have been quiet in the market this year, start stocking up on uranium in anticipation of a prolonged rise in prices.
There are tentative signs that is starting to unfold.
Two utilities—Tennessee Valley Authority and Argentina’s Nucleoeléctrica Argentina SA—invited offers for uranium supplies on Monday, people familiar with the matter said. A third, STP Nuclear Operating Co. in Texas, asked market participants about buying fuel without an official tender, the people said.
A spokesman for TVA said the tender was part of a routine process to determine market conditions. An STP spokeswoman declined to comment. The Argentine utility didn’t return requests for comment.
Individual traders aren’t the only ones placing money on uranium. Money managers including MMCAP International and Anchorage Capital Group, the hedge fund that agreed to sell the movie studio behind James Bond to Amazon.com Inc. in May, have bought physical fuel in a wager on higher prices, The Wall Street Journal has reported. Some uranium bulls say nuclear power will play a role in efforts to move away from fossil fuels, boosting demand.
A spokesman for Sprott said family offices, hedge funds and other institutional investors have bought the majority of new units recently issued by the trust.
Shares of a third investment vehicle for physical uranium, Yellow Cake PLC, have jumped 54% in London this year. The fund has said it expects to take delivery of 2 million pounds of uranium from Kazatomprom between October and December, taking its overall holdings to almost 16 million pounds.
“We’ve never seen this before in the uranium market,” Amir Adnani, chief executive of Uranium Energy, said of the Kazakh and Sprott fundraisings. “Long-term, this has to be bullish.”
Write to Joe Wallace at [email protected]
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