Uranium is a silvery-white chemical element and an energy commodity. Enriched uranium U-235 concentrations are critical fuel for nuclear power plants and reactors that power naval ships and submarines. Uranium is also crucial for atomic weaponry. The demand for uranium has been rising, and the price has been in a bull market since 2016. Rising demand for uranium has put upward pressure on uranium mining shares.
The uranium price is in a bull market
Uranium prices have been increasing in a bullish trend over the past eight years.
Source: Cameco.com
The chart shows the price appreciation from 2016, when the spot price was $18 and Cameco’s long-term price was $30. At the end of July 2024, the spot price was sitting at $84.25, and the long-term price was $79.50.
The global fundamentals for uranium have improved over the past years, pushing the price higher.
The world’s leading producing countries
The world’s leading uranium-producing countries in 2022 were:
Source: Statista
As the chart shows, Kazakhstan leads the world in uranium output, producing nearly three times second place Canada.
Kazakhstan’s national uranium mining company, Kazatomprom, is the world’s leading producer and seller of natural uranium. Cameco Corporation (CCJ) is the leading uranium mining and processing company in Canada.
Addressing climate change is bullish for uranium
Addressing climate change and a greener energy path has caused the demand for uranium to soar. The leading demand for uranium comes from nuclear power plants that use the commodity for atomic fission.
Source Statista
The chart highlights the growth of global operational nuclear reactors from the mid-1950s through the turn of this century. While the number has leveled off, green energy initiatives could cause it to rise over the coming years.
Source: Statista
The chart shows the number of nuclear power plants under construction in July 2024. China and India, the most populous countries with over one-third of the world’s population, lead in nuclear power plant construction. Green energy initiatives will likely increase the demand from the United States and Europe over the coming years as they move away from fossil fuels to alternative and renewable fuel sources.
The geopolitical landscape is even more bullish
Wars in Ukraine and the Middle East, the bifurcation of the world’s nuclear powers, and adding North Korea and Iran to the list of countries with nuclear weapons are other reasons for rising uranium demand. As countries spend more on defensive and offensive weapons, uranium is a staple for nuclear weapon production. A tense geopolitical landscape that has become a hornet’s nest of current and potential conflicts increases military spending. Therefore, uranium demand for military applications will likely increase over the coming years, further supporting the price.
Three ways for uranium exposure through mining share ETF products
Uranium prices are in a bullish trend, and the trend in any market is always your best friend. A direct investment in uranium is challenging, but there are plenty of choices regarding the mining companies that will benefit from higher prices. While there are individual mining companies producing uranium, ETF products can diversify idiosyncratic risks.
The top holdings of the GX Uranium ETF (URA) include:
At $25.25 per share, URA had over $2.872 billion in assets under management. URA trades an average of over 3.13 million shares daily and charges a 0.69% management fee. Meanwhile, URA’s blended $1.71 annual dividend translates to an above-market 6.77% yield.
The top holdings of the VanEck Uranium & Nuclear Energy ETF (NLR) include:
At $74.31 per share, NLR had nearly $218 million in assets under management. NLR trades an average of over 53,400 shares daily and charges a 0.60% management fee. Meanwhile, NLR’s blended $3.26 annual dividend translates to an above-market 4.39% yield.
The top holdings of the Sprott Uranium Miners ETF (URNM) include:
At $41.22 per share, URNM had almost $1.4 billion in assets under management. URNM trades an average of over 570,000 shares daily and charges a 0.85% management fee. URNM’s blended $1.75 annual dividend translates to an above-market 4.25% yield.
Given the rising demand from energy and nuclear applications, uranium is a hot commodity with great upside potential. Uranium mining ETFs could be the optimal path for exposure over the coming months and years.
On the date of publication, Andrew Hecht did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
