Going nuclear

On a day when newspapers report that next week’s UK government auction for off-shore windfarms has attracted zero bids, Cameco, the one-stop-shop to play the nuclear renaissance barrels through high after high, with a chart that speaks of a fuse being lit. The uranium market is small, it’s also opaque, and yet analysts talk of a pivotal moment, an inflection point, a dramatic change in fundamentals that will result in a ‘chaotic’ move to the upside. The 60% YTD romp in the industry gorilla CCJ is but a baby-bull, a whiff of cordite, a mere 3-iron off the tee. The reason perhaps for the renewed interest is that for the fist time in history, models are suggesting that the market has slumped into a structural deficit. There is not enough to go round and utilities, that have long grown accustomed to years of plenty courtesy of the surpluses post the 2011 meltdown of the Fukushima Daishi reactor, are about to get one on the nose. For years Europe and the US have been de-commissioning reactors, with energy policy apparatchiks wet-lipped at the promise of wind and solar power, but the fall out of Russia’s blitzkrieg on Ukraine has left many mandarins uneasy of long-term energy security. Some countries are now moving fast. See Sweden for details. By the end of this year it has been suggested that commercial inventories will be run down, the shelves all but empty, with stocks covering less than 18 months of reactor demand. The last time this happened was in the mid 2000s when prices exploded higher. Looking out a decade and the supply deficit only gets worse, with some whispering that the cumulative deficit will exceed 250m lbs. This is bad news for utilities that are woefully under-contracted post 2025 and is a deficit of eye-popping proportions given growing worldwide demand. The emergence of a number of financial vehicles that have quietly launched over recent years adds a whole lot more flavour to the soup. Indeed, news that Cathie Wood’s ARK Investment had been buying Cameco raised more than a few eyebrows over the summer and whilst such news means absolutely nothing, and could be spun a variety of ways, the short TSLA, long CCJ trade is surely not one that many have on in size. ‘Electric vehicles lose their spark’ reads another headline in the same newspaper paper. Hmm. One makes fancy cars the vast majority of the world can’t afford, the other is a key supplier to the only source of zero-carbon, baseload energy. Pick your horse.