I’ve been learning about vanadium lately. It’s an interesting sector: the price is up tenfold in two years because supplies are tight while demand is ramping up based on more stringent rebar standards in China, which means the world will need about 20% more vanadium.

Like I said, an interesting sector. Vanadium is produced mostly as a by-product from iron ore, so price has little impact on output.

There are primary vanadium mines but some are being shuttered because of emissions (the ore has to be roasted). And there are some vanadium projects but few that are advanced. It does seem to spell opportunity and I would be lying if I said I wasn’t diving into a few projects more deeply. But I bring this all up now because several vanadium folks I talked to of late specifically bashed uranium, calling it a boring, oversupplied market. I beg to differ. For one, boring is good. Vanadium isn’t boring…but I have no idea how long the price will hold its tenfold gains.

I’ve seen all manner of specialty metals spike and then fall back off in my decade-plus of resource investing (remember molybdenum at $40 a lb.?). As a result I prefer bigger, more established markets. Uranium is that, relative to vanadium. And its trajectory doesn’t depend on changing Chinese building codes.

Uranium demand depends on nuclear reactors, which are massive investments that don’t usually stop once started. And there are hundreds under construction.

As for being oversupplied, here’s an interesting chart.

This shows Cameco’s uranium production and purchases (grey bars) versus its contracted delivery volumes (blue bars). Check out 2018 – proof that Cameco is doing what it said, which means cutting 4 way back on production and meeting its delivery contracts by tapping into its inventory (red line) and buying in the spot market.

CCO’s spot market purchases are making a difference. Here’s the uranium spot price and spot market volumes.

The price has been climbing steadily for six months now, rising from US$20 per lb. U3O8 to sit today at US$28.80 per lb. That’s a 44% gain and it’s happening because of the big bar on the far right, showing a big jump in spot market volumes. Cameco is following through on its promise to tap the spot market for over 10 million lbs. U3O8. That’s half the market. I realize the chart shows a market averaging close to 40 million lbs. annually, but most pounds are transacted twice so the actual amount moved is estimated at half the spot market volume.

Cameco is buying out the spot market. The spot price is rising steadily. Sooner or later we’re going to wake up to the catalyst I’ve been awaiting, which is news that a nuclear utility signed a new long-term supply contract at a price well above spot. It’s gotta happen, because utilities have big uncovered fuel requirements and they can’t mess around with running out of fuel (read: nuclear meltdown).

Uranium stocks haven’t quite mirrored uranium’s gains. To be honest, I’m not sure why. It might be that uranium bulls who got in too early used recent gains as an opportunity to exit. It might be that the market knows prices are still well below break even for most of the world’s uranium mines and so need to see more before believing. Perhaps it has taken so long for uranium to start glowing that even contrarian investors have lost interest.

I’ve said it before and I’ll say it again: there’s a significant uranium supply gap looming and nothing that can fill it. When uranium goes it will go on an explosive run. And that time is coming because the world’s major uranium producers – Cameco and Kazatomprom – are pulling it near. Cameco is buying out the spot market. Kazatomprom is cutting production. The spot price is climbing steadily. The time to position is now.

Maven has two uranium positions: NexGen Energy (TSX: NXE) and Uranium Energy (NYSE: UEC)