What Will Kick Off the Next Uranium Bull Market

Written by Nick Hodge
Posted June 19, 2018 at 8:00PM

A uranium bull market has been on the horizon for years.

I’ve written countless articles and given many talks and interviews saying as much.

That horizon may not be that far off in the distance as the bottoming process of a typically cyclical commodity has now mostly played out.

Uranium prices have bounced along all-time lows near or below $20 per pound for the past two years. No uranium company makes money at that price.

And that’s why major suppliers have been making production cuts. First from Kazakhstan, the world’s largest producer. Then from Cameco (NYSE: CCJ)(TSX: CCO), the world’s largest publicly traded producer.

Together, they’re taking tens of millions of pounds of uranium off the market.

A new uranium fund expected to list soon — the Yellow Cake fund —  is expected to buy up another eight million pounds. (Not to mention the formation of a new uranium fund is bullish by itself.)

In the global economic balancing act of supply and demand… supply just tipped the scales.

As such, uranium prices are up as much as 20% this year. And you can bet that’s a small-caliber warning shot to typically lethargic utilities that need to start signing new uranium supply contracts to fuel their reactors.

Utilities can afford higher prices because uranium is a small part of the overall cost of operating a reactor, but 20% is sure to get their attention and perhaps hurry them along a bit.

Not only that, but utilities coming back into the market would add demand pressure at a time when supply is already being cut off.

And because uranium has been in a bear market for so long, it will take time for capital investment to happen to bring new supply online. It’s not like you can flip a switch.

It’s that window that makes mining bull markets like uranium so exciting. The price explodes higher, taking share prices with it, to incentivize new supply to come online.

With 55 new reactors coming online globally (don’t let anyone tell you nuclear is dead) between 2015 and 2019… things are about to get interesting.

Other pieces are falling into place as well, especially in the United States, where the Department of Energy has stopped selling excess uranium into the market, further tightening supply and showing the administration's sympathy for the industry.

Uranium production in the U.S. is currently near a 70-year low, yet it’s the largest nuclear nation, leaving it reliant on foreign imports for more than 95% of its uranium needs.

The U.S. has 100 reactors but only produces enough uranium to supply one.

This is unsustainable and dangerous. And Trump is likely going to change it.

Enter Section 232.

Under what’s called a “Section 232 Petition”, the U.S. Commerce Department can limit the amount of a commodity coming in from other countries, thereby creating a more robust domestic market.

Section 232 was activated in January when two American uranium producers filed it, citing “a significant detrimental impact on the national, energy, and economic security of the U.S. and the ability of the country to sustain an independent nuclear fuel cycle.”

The Department of Commerce must now initiate an investigation, after which the Secretary of Commerce — Wilbur Ross — will have 270 days to prepare a report.

And then the president has 90 days to act. So all this is less than a year away.

Trump has already signaled his support for the U.S. nuclear industry on multiple occasions. My gut says he will support domestic uranium mining in some way.

Section 232 asks for requiring 25% of U.S. demand to be met with American uranium. That would be up from 3% today, and create lots of jobs and investment. Seems pretty Trumpy.

An action like that would send many uranium companies much higher. It would bring the issue to the fore. And it could be the final spark — after all the tinder I’ve laid out above — that kicks off the new uranium bull market.

I’ve been saying Trump would turn to nuclear as part of his “Make America Great Again” strategy for over a year now.

I told you I had “Trump’s nuclear codes.”

I was right.

And the uranium investments I suggest here are going to pay off handsomely as a result.

Call it like you see it,

Nick Hodge Signature

Nick Hodge

follow basic@nickchodge on Twitter

Nick is the founder and president of the Outsider Club, and the investment director of the thousands-strong stock advisories, Early Advantage and Wall Street's Underground Profits. He also heads Nick’s Notebook, a private placement and alert service that has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world. For more on Nick, take a look at his editor's page.

*Follow Outsider Club on Facebook and Twitter.


Investing in Marijuana Without Getting Burned