Justin Huhn: Uranium Setup is "Profound" — Supply Fragile, Demand Strong
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"I would argue the setup here is night and day better than the previous bull market," Justin Huhn of Uranium Insider said about the uranium sector.
The uranium spot price is edging closer to the US$60 per pound mark, and Justin Huhn, founder and publisher of Uranium Insider, believes market fundamentals continue to point to a major opportunity for investors.
Speaking to the Investing News Network, he honed in on important supply-side issues to watch, including Kazakhstan's deepening relationships with Russia and China. In his view, these developments have added risks that weren't there 18 months ago.
"Basically what it's looking like to us is that the number one producer of uranium in the world — which is Kazatomprom, and of course the country of Kazakhstan — looks increasingly tied to the east," he explained. "When you have most of the uranium demand in the west — 25 percent of the world's uranium demand comes from the US alone — when you have this major player increasingly tied to both China and Russia, that creates a lot of risk for western nuclear utilities, especially when they are voluntarily avoiding business with Russia currently, and when that material has the ability to be officially sanctioned by the US."
On the demand side, sentiment toward uranium continues to improve, with many countries around the world either turning to nuclear power for the first time or taking steps to increase their nuclear reactor fleets.
At the same time, the number of physical uranium investment vehicles is increasing and creating a new dynamic. The best known is still the Sprott Physical Uranium Trust (TSX:U.U), but it was recently joined by Zuri-Invest's actively managed certificate. According to Huhn, there are likely at least three other physical acquisition funds currently being set up.
"There is going to be a probably a half dozen of these things by this time next year," he said. "It's just this really interesting element to this investment, because you can talk about supply and demand until you're blue in the face, but this element of financially driven vehicles that give the investor a lot of power to actually influence the price of the commodity … is pretty unique."
Huhn also discussed the differences between the current uranium cycle and the previous bull market, saying that today's setup is "night and day better." One factor is that during the previous run commodities and markets overall were strong.
"The only thing we're not seeing right now is capital flows due to a general risk-off environment in the capital markets," he said during the interview. "Will that turn? Nobody can predict that. I believe that it will eventually, and I also think that this market is going to offer a unique opportunity where you actually have a rising commodity environment, even though we might be going into some sort of deflationary environment, at least for the short and near term."
Watch the interview above for Huhn's full thoughts on the topics discussed above.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
