Palisade Research - Mon, Nov 26, 2018

The Uranium Bull Market's Now Beginning as Global Production Plummets

picture of a pile of colored tiles with symbol U uranium on top

For uranium investors - the suspense of a nearing bull market must be maddening. . .

We keep hearing - and being promised - that the uranium bull market's "right around the corner" - only to be left deeper in the red.

But things actually have fundamentally changed in the uranium market recently. . .

And in terms of an asymmetric (low risk high reward) investment idea - there's nothing quite as attractive as uranium today.

So let's take a closer look.

In mid-June, I wrote an article declaring that the uranium market was set to rally (you can read here if you missed it).

And since then, the price of uranium's up over 18%.

Even more exciting is that this was during a monster U.S. dollar rally - which has crippled most other commodities.

This indicates that the underlying uranium fundamentals are changing - and finally for the better.

Here's a little context.

All this started back in December 2016 when Kazakhstan - the world's largest uranium producing country - slashed annual output by 10%. They did so because they didn't want to waste mining their finite uranium reserves at a loss.

And although a 10% output cut wasn't enough to end the brutal uranium bear market - it sent a powerful signal to the market. . .

That major uranium producers were at their limit and about to break. So they were going to kill the bear market themselves.

What I mean is - if the market wasn't going to absorb the excess uranium supply, then the producers were going to force it.

And by next year - in January 2018 - Kazakhstan announced another 20% decline in annual uranium output.

Then Cameco Corp - the largest Canadian uranium producer and major player - followed their lead and shut down their McArthur-River mine (which remains on an indefinite shutdown). This mine alone produced 12% of the world's annual uranium output (you can read the in-depth details here).

Now - this is a huge amount of uranium output that's disappearing in less than 12 months. . .

But why is it all happening now when uranium prices have dragged lower for nearly a decade?

That's because after the 2011 Fukushima Tsunami crisis - uranium producers thought they could weather the storm (aka survive temporarily weaker prices)

But seven years later and uranium prices are still at multi-decade lows. . .

Why? Because most producers of a commodity will try to ramp up production so that they make up for lower prices.

For example, if a pound of uranium (aka 'yellow cake') falls from $60 to $30, then producers must more than double output to make up for the lost revenue.

But when all producers do this - it floods the market with excess supply. Pushing prices even lower - and keeping them there.

So eventually as uranium prices fell to around $20 a pound, nearly 95% of global producers found themselves mining at a loss.

This forced producers to face the 'tough-love' stage and accept reality.

Which was: they needed to cut marginal uranium production - and a lot of it.

So finally - this year - there's been a meaningful reduction of uranium production. Output's expected to decline to 135 million from a global peak of 162 million - a 16% drop - from 2016.

These are really deep cuts - and this trend will continue for many years as producers slash output after facing the 'tough-love' of this brutal bear market.

But this is why there's an opportunity now.

The kind of brutal bear market of which uranium recently suffered is the foundation for a multi-year bull market. Because the sectors had a significant drought of new investment. And diminishing supplies put a floor under prices.

That's why speculators must be ready for the steady rebound in uranium prices as the market fundamentals re-balance.

Especially as uranium demand grows. . .

I know it's hard to believe - but mining companies like Cameco are finding that it makes more sense at current prices to buy uranium instead of producing it.

What I mean is - they would rather keep their uranium in the ground instead of mining it at a loss. Thus they buy uranium cheaper on the open-market so that they meet their customer obligations.

And as long as top producers like Cameco continue holding back production and instead keep buying on the open-market - uranium prices will have support.

Also, we have emerging markets - such as China and India and Saudi Arabia - building more nuclear reactors than previously expected. These places will remain key for stimulating long-term uranium demand.

So - in summary - we're finally seeing the deep uranium supply cuts happening. All while demand grows. publishes interesting contributor articles in addition to its own content. We have not verified any of the above details.

Sign-up at (or for our Small Cap Stock Observer newsletter, and to set-up your own My Portfolio, My Watchlist & Alerts and News by Email preferences, or to post at our Bulletin Boards. Free!

Please note that nothing in this report should be taken as a recommendation in any way, and that everything from is subject to the terms of our Privacy Policy and Disclaimer.

comments powered by Disqus

Detailed Quote Portal

symbol lookup | (TSX add :ca)

Membership Privileges

  • Investors Guru Small Cap Stock Observer - newsletter emailed monthly!
  • Featured Stock Profiles - emailed on occasion!
  • News by Email - as it's released, according to your My Preferences!
  • My Portfolio - login to view or update your holdings, or have it emailed daily!
  • My Watchlist & Alerts - login to view or update your stock radar list, and set price triggers for email alerts!
  • Bulletin Boards - no need to request boards, just Quote it! Social Sign-on & Share your ideas, observations & trends!
  • Find it all! Find it Fast! Comprehensive stock research webpages. No more endless clicking!

Email: (see Privacy Policy)
Password: (4-15 characters)
Username: (4-15, BB posts etc)

unsubscribe anytime

Bookmark and Share

 Subscribe in a reader

Our Mobile Site