Uranium miners up 59% since election on pro-nuclear hopes
Uranium’s spot price had a rough ride throughout the course of 2016, but for many investors there is suddenly a new aura of optimism around the troubled metal.
It all starts with Donald Trump’s “America First” strategy, which is being perceived by many as a potential boon to the uranium sector. Official details are slim, but industry executives are currently speculating that the Trump administration will be better for nuclear power than the previous government.
Einhorn’s FOF Re-positions Portfolio, Makes New Seed Investment In Year Marked By “Speculative Exuberance”
It has not just been rough year for David Einhorn's own fund. Einhorn's Greenlight Masters fund of hedge funds was down 3% net for the first half of 2020, matching the S&P 500's return for those six months. In his August letter to investors, which was reviewed by ValueWalk, the Greenlight Masters team noted that Read More
If that’s true, then it would mean far less regulatory hurdles for nuclear power, and likely even funding to bring more power plants online in the United States.
A Shot in the Arm
Perhaps such a catalyst is just what the metal needed. Both the spot price and the share prices of uranium miners have been in a gruesome bear market ever since the 2011 Fukushima incident in Japan. The prolonged pain has weathered down investors and companies alike, but everything has to bottom at some point.
As David Erfle from Kitco pointed out last week, the chart for the the Global X Uranium ETF (URA) makes any other downturn look like a piece of cake. The ETF, which tracks global uranium miners, has lost a whopping 90% of its value over the last six years, including two rollbacks (in 2013 and 2015).
Lately, thanks to the “Trump bump” and a 10% production cut in Kazakhstan announced earlier this month, the URA is suddenly buzzing with volume. The ETF is now back up on its feet, gaining a solid 59% since the election.
But Can Uranium Be Great Again?
A bounce in uranium stocks is something that was way overdue. However, if nuclear-related announcements aren’t made soon from the Trump administration, the newfound optimism could fade pretty fast.
Statistically speaking, the World Health Organization says that nuclear power kills less people per terawatt hour than any other major source of power, even rooftop solar. Nuclear is also friendly from an emissions perspective: using a life-cycle emissions analysis, nuclear generates similar emissions to wind or hydropower.
The problem, of course, lies in the fat tail risk of a nuclear catastrophe, which is something that is still fresh in people’s minds in the wake of Fukushima.
Whether nuclear and uranium can be great again depends on the public’s tolerance for such projects, as well as a significant amount of support from the government to push new projects through. The rally is much welcomed by uranium investors – but it will remain unclear if it has any long-term legs until these two considerations are met.
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
Article by Jeff Desjardins, Visual Capitalist