Full Steam Ahead For This Energy Commodity!

| December 3, 2013 | 0 Comments

uraniumGet ready…

Investor sentiment towards uranium is quickly turning bullish.

As you maybe aware, the price of this essential energy commodity has plummeted over the past few years.  In fact, before the Fukushima nuclear disaster in March 2011, uranium was trading at just over $75 a pound.

But in response to the horrific event, investors rightfully questioned the ongoing prospects of global uranium demand.  As a result, uranium (u3o8) recently sank below $35… a stunning 53% drop.

Take a look…

Uranium

chart courtesy of CME Group
 

As you can see from this weekly chart, it has been a spectacularly rough ride for anyone bullish of uranium.  Bears have been in complete control of this market for nearly 2½ years.

But that’s about to change…

A fundamental shift is underway in the supply/demand balance for domestic US uranium. 

You see, under an agreement established in 1992, the US has purchased large supplies of highly enriched uranium (HEU) from Russia.  In the “Megatons to Megawatts” program, Russia down-blended and sold 500 metric tons of HEU contained in cold war era nuclear warheads to the US. 

The historic deal achieved two important goals… 

First of all, it drastically decreased the number of nuclear warheads threatening global society.  And secondly, the essential fuel provided around 10% of US electricity over the past 20 years. 

But now, the highly successful program is coming to an end…

As a matter of fact, US Energy Secretary Ernest Moniz just announced the final shipment of Russian HEU departed from St. Petersburg, Russia in late November.

Due to the end of this program, around 15% of supplyis set to disappear from the US uranium market.  To further clarify the magnitude of the loss, approximately 50% of domestically produced nuclear energy has come from the Megaton to Megawatts program since 1992.

As with any commodity, when a supply disruption becomes apparent, prices have a tendency to rise…

And with uranium currently trading near a 7-year low, now’s the perfect time to take a close look at long-term investments in the nuclear industry.

You see, not only is a major source of US supply evaporating, but the long-term global uranium demand picture is still strong.  Contrary to popular belief, the outlook for the global nuclear industry is holding up well after the Fukushima disaster. 

Yes, some countries like Germany and Switzerland have pledged to abandon nuclear power.   

But other quickly growing countries like China and India have no choice but to embrace it.  Sickening pollution and surging electricity demand make nuclear an obvious choice over coal-fired power plants in these quickly developing economies.

How can you capitalize on higher uranium prices?

Unfortunately, there isn’t a pure price play uranium tracking ETF. 

However, there are ETFs holding the stocks of global uranium producers.  For example, the Global X Uranium ETF (URA) holds Cameco (CCJ), UR- Energy (URG), and Dennison Mines (DNN).

As uranium recovers from the vicious multi-year selloff, the bottom lines of these hard-hit miners will no doubt get a breath of fresh air.  And as investors grasp the clean energy producing potential of nuclear, shares of uranium miners will likely continue higher.

Stay tuned to Commodity Trading Research for continued coverage of the hard asset markets!

Until Next Time,

Justin Bennett

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Category: Commodity Trading, Energy

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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