Another rollercoaster week in the uranium market - let me walk you through the latest on Kazakhstan supply, Russia sanctions, and why I’m pumped about this healthy sector pullback.
First, Kazatomprom’s plan to boost production back to licensed levels by 2025 initially spooked traders on Friday. Who wouldn’t fret over Kazakhstan, supplier of 40% of global uranium, turning on the spigot? More supply logically means lower prices, right?
Well, hold your horses, because the announced production ramp up is no slam dunk. Kazakhstan’s mines face major constraints - labor, equipment, infrastructure. Reaching their lofty goals requires massive investment in new wellfields ASAP. I’m skeptical they hit their targets.
Even if they do, most new production is spoken for. It’ll go to Orano who desperately needs more inputs for their contracts. And Russia is hungry for uranium too, scooping up half of Kazatomprom’s new mine production.
China has also gobbled up multi-year Kazatomprom supply contracts. Bottom line - very little new material will reach struggling Western utilities. The panic selling looks overblown.
Speaking of Russia, tensions with the West raise worries they could sanction uranium exports. This would send prices ballistic since the US imports a massive amount of Russian uranium - around 20% of total supply.
US utilities lobbied hard to keep Russian uranium off the sanctions list after the Ukraine invasion. They know the dire risks of these imports suddenly stopping. Right now, some US reactors still depend on timely Russian deliveries to operate. An immediate supply cut-off would be catastrophic.
But make no mistake, the option still lurks as the West-Russia conflict festers. Moscow could cripple US nuclear generation almost instantly by tightening the valve.
Traders now recognize the glaring vulnerability after years of over-reliance on cheap Russian supply. This single point of failure was ignored far too long. The reality of unstable Russian fuel is finally sinking in.
When (not if) those sanctions hit, the uranium price would explode overnight. Utilities would scramble for alternate supply as capacity factors plunge. But the amount required simply doesn't exist outside Russia. The damage would be done.
This risk seems lost on complacent US politicians who assume Russian uranium will keep flowing reliably no matter the geopolitics. Moscow is not so passive. Supply security is unraveling rapidly whether the West accepts it yet or not.
The market is finally awakening to these harsh realities. Uranium stocks just took a heathy double-digit drubbing. But corrections are expected on the bumpy road higher. As I’ve said, waving goodbye to Russian supply would light a fire under uranium prices. The eventual supply/demand imbalance is locked in. The only question is timing.
So I welcome this pullback with open arms. Now is when opportunities are made. Keep some powder dry and buy the fear when others sell. Always be ready to pounce.
The uranium bull run is far from over. Dips like this let us grab the gift of cheap shares as the long-term thesis only grows stronger. Take advantage of the negative sentiment and make a plan. Then watch as reality reasserts itself. Patience pays.