The uranium market has entered a new phase, but there’s still plenty of time left in the current cycle.
‘I do feel as though we’re in year three of this cycle,’ said John Ciampaglia, CEO of Sprott Asset Management. ‘It’s impossible to know how long it will last, but we still think it has quite a bit of room to grow.’
The uranium spot price has taken off in recent months, breaching US$80 per pound for the first time since 2008. But Ciampaglia said it will have to rise further before companies will be able to bring sufficient supply online.
‘Even at US$80 uranium it’s still in our opinion not high enough to stimulate and incentivize the hundreds of millions of pounds of incremental production that the world will have to somehow figure out how to produce over the coming years to meet the expected demand with all of the nuclear capacity that has been planned around the world,’ he said.
Many market participants are wondering if uranium prices will spike like they did during the last bull market. Ciampaglia said that while people shouldn’t invest with the expectation of a spike, there are reasons to believe it could happen.
Here’s how he explained it:
Why people anchor onto this spike theory is because it is a very concentrated supply chain. You have one country that produces 45 percent of the world’s uranium — it’s like the equivalent of having a single country (with the) power of OPEC. So it is a highly concentrated supply chain. When you add in all the other countries … like Uzbekistan and China and Russia, they control a pretty significant size of the overall global production. And then more recently we’ve had a coup in Niger, which is another country that produces 4 percent of the world’s uranium.
People focus on this risk that if there’s a disruption in any of those countries we could have a short-term squeeze or a supply crunch. And that could cause the price to spike.
Watch the interview above for more from Ciampaglia on uranium supply, demand and prices. He also discusses the Sprott Physical Uranium Trust (TSX:U.UN), whose net asset value recently passed US$5 billion.
Watch the interview above for more of his thoughts on uranium supply, demand and prices.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.