Has a Uranium Bull Market Begun?

Over the past year, there has been a divergence in the energy market: spot uranium advanced 12% while oil, natural gas, and coal all fell anywhere from 30-70%.

The reason? For the first time in history, uranium has slipped into a persistent and widening deficit.

Some say uranium has reached a pivotal inflection point that could force the price higher by as much as three- to four-fold over the next several years.

However, uranium is far less transparent than other commodity markets. So let’s take a closer look.

Today’s Uranium Market

Uranium’s structural deficit has accelerated dramatically since 2021. Reactor demand bottomed in 2020 at 161 million pounds of U3O8 (triuranium octoxide), and is expected to reach 188 million pounds this year.

Meanwhile, primary uranium production remained depressed through 2022 at 120 million pounds—a multi-decade low. Secondary supply of uranium averaged only 22 million pounds, leaving a deficit of nearly 30 million pounds in both 2021 and 2022.

A real market-changing event occurred in 2021, as a new source of demand burst onto the scene: the financial buyer. Led by the Sprott Physical Uranium Trust (SRUUF), financial vehicles have acquired between 25 million and 30 million pounds each year in 2021 and 2022. In effect, these financial vehicles have taken the uranium off the market that was depressing prices.

Unlike open-ended funds, such as the SPDR Gold Shares (GLD), the financial uranium vehicles are closed-ended, meaning the material cannot readily flow back into the commercial market. Once material is purchased, it is usually locked up for a long time.

The end result was that the uranium market experienced a deficit of nearly 180 million pounds between 2020 and 2023. This deficit was met by depleting the commercial inventories that had accumulated following the Fukushima nuclear disaster in Japan in 2011, caused by an earthquake and subsequent tsunami.

In a way, what’s happening is reminiscent of the U.S. meeting oil shortages after Russia invaded Ukraine by pulling oil from its Strategic Petroleum Reserve (SPR).

By the end of 2023, some forecasts say commercial inventories will be…

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