If you want to find a happier bunch of investors on the ASX, you’d probably be hard-pressed to find a more joyous bunch than anybody who’s been bagholding on Peninsula Energy (ASX:PEN) the last few years – or, similarly, another uranium fave on the HotCopper forums, Boss Energy (ASX:BOE).
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Both Australian companies were slammed in the last few years – Boss a little more dramatically than Peninsula, though both ultimately saw their share prices fall due to operational issues too unpalatable for most investors – but with uranium prices on the way back up, appetites are changing.
‘On the way back up’ might be an understatement. If you ignore a short-lived uptick in 2024, they’re actually at ten-year highs; long-patient uranium bulls may (or may not) be on the cusp of a new price floor at the benchmark level.
That remains to be seen, and it’s worth taking a look at why uranium prices are going up right now to start the calendar year. The first is that there are simply more nuclear power plants being built globally, so that means there’ll be more demand for uranium in the years ahead. That’s one part of the story.
But uranium, when ordered by a nuclear plant, is actually ordered some years in advance, and in that way, plenty of analysts and fund managers suggest the ‘real’ uranium price is often higher than what benchmarks reflect, when it comes to the prices that utilities are factoring into long-term contracts with suppliers.
And at the same time, the nature of these long-in-advance orders can also help to bury the true nature of uranium oversupply or undersupply globally. According to Tribeca, at least, the market has missed a large uranium deficit in recent years.
Ultimately, that deficit is based on projected demand – so where’s the demand coming from? Data centres: The type that helps put out AI content (or slop, if you prefer). Large tech companies are staking hopes on nuclear power being an answer to the ever-greater amounts of electricity needed to power centres, even if usage of AI and its relevance to society on the grand scheme remains tenuous.
The idea of going nuclear makes sense from an ESG standpoint. Gas-fired power demand is at record levels in the U.S. thanks to AI, and it would take a wilful idiot to suggest the consequences of an increasingly unpredictable global weather – thanks to global warming – aren’t evident all around us and overseas.
At any rate, that’s the demand thesis behind uranium right now, but of course, there’s one other big factor to why uranium’s climbing that all this overlooks.
Uranium is climbing too because everything else is. Gold has kicked off an everything rally, and many investors predict we’re entering a new ‘commodity supercycle.’ Fantastic news for uranium bulls, even if that means uranium is going up on a momentum trade more than rationality – but to those printing crash, that’s not something to worry about. As long as they sell at the right time, should a correction occur.
And – will a correction occur? Honestly, for as long as gold keeps soaring, I am willing to say I can’t see it happening anytime soon.
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