Global X Uranium ETF: Well Balanced Exposure to Resumed Uranium Price Growth Backed by Increasing Demand for Non-Polluting Energy

Uranium prices collapsed in 2011 and spent ten years grinding lower…until recently when it had exploded. Alternative clean power sources are indeed great, but mostly priced-in by investors. On top of that, they can’t provide stable, full time industrial grade power supplies. And over the past few years, weather-related power outages became more common. Fortunately, there is a carbon-free answer: new nuclear power plants. The market for nuclear fuel has been heating up recently as governments, including the U.S. and China, see a role for nuclear power in their clean energy programs. And as the world builds new, reliable nuclear power plants, the price of uranium will provide a steady continuous rise. According to the World Nuclear Association, the current operable global reactor energy capacity is 394,000 MWe while there is another 53,3000 MWe soon to be added due to new reactors.

Yesterday, on July 28, Cameco (CCJ) relatively quietly reported its quarterly earnings. Cameco President and CEO Tim Gitzel said in a telephone conference: “Demand for uranium is growing at the same time supply is becoming less certain. Since 2011, about 1.6 billion pounds of uranium have been consumed in reactors, and only about half of that or 800 million pounds have been placed under long-term [utility] contracts."

Cameco was incorporated in 1987 and is headquartered in Saskatoon, Canada, and produces and sells uranium. It operates in two segments, Uranium and Fuel Services. The Uranium segment is represented by exploration, mining, and milling, as well commercial activities with the epic uranium concentrate. The Fuel Services segment engages in the refining, conversion, and fabrication of uranium concentrate, as well as the purchase and sale of conversion services. The company sells its uranium and fuel services to nuclear utilities in the Americas, Europe, and Asia. Under the strategy, Cameco is continuing to work at its Cigar Lake uranium mine in northern Saskatchewan province of Canada, and purchasing the U3O8 concentrate in the spot market to make up for the shortfall in mined uranium and delivering the material into contracts.

The uranium market recently extended its upward momentum, with NYMEX futures trading above $32 a pound and touching their highest level since July 2020 on the back of dwindling inventories coupled with the cited by Cameco higher demand. Meanwhile, supply remains limited as uranium mining has been steadily cut back in recent years. Since the beginning of March uranium price grew from $27.95 to current $32.40, and the price momentum remains perhaps the strongest across the entire commodities sector.

There is also a more balanced instrument of exposure to the growing uranium market. Global X Uranium ETF (URA) ETF is an exchange traded fund launched and managed by Global X Management Company. Global X Funds - Global X Uranium ETF was formed on November 4, 2010 and is domiciled in the United States. It invests in global public uranium extraction, purchase and sale related equities. It seeks to track the performance of the Solactive Global Uranium & Nuclear Components Total Return Index, by using full replication technique. The underlying index is designed to measure broad based equity market performance of global companies involved in the uranium industry. The fund boasts a 6 month total return of 36.34% to date against the S&P 500 return over this period of just +16.19%.