|Is this a trade to jump on?
Depends on your appetite for political risk. Russia hasn’t actually banned uranium trade with America yet. If it does, the uranium price will spike. I think the spike would be big enough to be worth trading but I wouldn’t assume it would kickstart a new uranium bull market, so buying on this opportunity means being ready to sell pretty much as soon as it happens, if it happens. Certainly a good number of naysayers think it’s all a pressure tactic and that Russian uranium supplies are just fine.
For context: 15% of US uranium requirements is about 7 million lbs. per annum. In the last two years we’ve seen far more supply come offline than that – not just shift destinations, but come offline – as Cameco, Kazatomprom, and Areva put production, and yet uranium pricing has remained pretty stagnant. That’s why I’m not convinced this move, if it happened, would kickstart a uranium bull market.
Uranium will yet have its day. Demand will outstrip supply in the medium term and prices are nowhere near high enough to incentivize new mine builds. If Russian and America get into a real spat, Putin could pressure Kazakhstan to suspend its uranium trade with America, which is larger than Russia’s. Escalation of that nature would probably turn this spike into something more substantial for the sector – but unless I see that happening, I think this uranium development will either fizzle or create a spike that fades.
As such, if you really like the uranium space and watch it closely, buying a big producer (like Cameco) or a company with the ability to quickly start producing uranium in America (like Uranium Energy Corporation) makes sense. In fact, the latter makes a lot of sense, especially if you are inclined to believe the Russia-US spat will grow. But if you decide to play, be ready to take profits because political moves can disappear as quickly as they appear!