Energy

Uranium Investing

The uranium price has remained unchanged at $36.50 per pound of U3O8 for the last few weeks.

Go here for our latest on the uranium price.

A summer slowdown has set up camp in the uranium market, with the price remaining unchanged at $36.50 per pound of U3O8 for the last few weeks. However, despite the weak pricing environment, it seems that market players at last believe the bottom has hit. 
Case in point: Raymond James analyst David Sadowski said in a recent note to clients that uranium producers are down 25 percent, while uranium juniors are down 23 percent. That being said, he sees “limited downside from current equity valuations and good potential for out performance over the balance of the year as the stocks play catch-up and benefit from recovering sentiment and underlying commodity prices.”
And though the uranium price is currently at a standstill, Sadowski believes that given high uncovered utility needs and the uranium shortage expected by roughly 2020, the price could rise to $38 per pound of U3O8 in the second half of 2015. The uranium price could then reach $45 per pound in 2016 before hitting a longer-term price of $70 per pound. Sadowski sees $70 per pound as the price required to incentivize mine supply to meet future demand.
All of those factors point to a quiet summer for the uranium market, but now and in the coming months investors should nevertheless be on the lookout for milestones from the usual suspects: Japan, China and utilities.

Japan reactor restarts imminent

In terms of Japan, World Nuclear News reported last week that nuclear fuel was being loaded into Kyushu Electric Power Company’s (TSE:9508) Sendai 1 reactor.
The fact that Kyushu has been granted a green light to refuel the reactor is a positive indicator for all uranium companies, according to Sadowski. The reactor could start up sometime in August following a month-long inspection. The country is aiming to have roughly 35 reactors online by 2035, with 11 online by 2016.

Chinese demand rising

Outside Japan, reactor restarts in China are urging along rising uranium demand. So far this year, four reactors have started up, with a further eight expected by the end of the year.
Sadowski estimates that by 2025, China will surpass the US as the largest consumer of uranium at 52 million pounds per year. He also expects to see the Asian nation continue to be a “significant builder of strategic pounds.”
Chinese utilities have publicly stated that to support that growing demand they are interested in purchasing more overseas projects. The utilities are seeking out large, low-cost assets in Kazakhstan, Canada and Australia. Sadowski believes that should sentiment and the uranium price improve, investors can expect to see more global mergers and acquisitions from China that could incite others.

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