When uranium costs rise, so does Cameco inventory – and vice versa.
Cameco Company (CCJ -5.32%) shares had been down 4.9% by 1:15 PM ET this afternoon, and it isn’t too exhausting to see why. Provide constraints and rising demand for uranium in late 2023 and early 2024 pushed costs for the radioactive metallic nicely above $100 a pound earlier this 12 months.
However the rally disappeared in March, resulting in a pointy selloff. Uranium costs have since rebounded to the mid-$80s — and have just lately begun to say no additional.
Why are uranium costs falling?
Why does this occur? As NorthernMiner.com defined yesterday, “final 12 months’s wonderful development was pushed by a robust demand outlook.” In distinction, latest declines in uranium have been pushed by a mixture of elevated provide and the influence of upper costs on demand.
Northern Miner blames the resumption of full manufacturing at Kazakhstan’s Kazatampram, new manufacturing in Namibia and Australia and elevated manufacturing at Cameco itself. Analysts presently forecast uranium provide to develop 4.1% yearly between now and 2030, easing provide constraints and reducing the premium consumers are prepared to pay to safe the uranium they want.
Is Cameco inventory on the market?
This isn’t precisely a brand new phenomenon for traders in cyclical shares akin to mining firms. Low provide drives costs up for the accessible provide, encouraging miners to extend manufacturing as a way to reap extra earnings. This extra manufacturing, nevertheless, will increase provide and forces costs down.
As I’ve famous earlier than, $60 a pound looks like the magic quantity at which uranium manufacturing hovers, driving up manufacturing, growing provide, and driving down costs and earnings for firms like Cameco. With costs nonetheless within the $80s immediately, earnings must be mild for Cameco till sufficient provide comes on-line to drive costs down.
With the corporate’s fill up 70% over the previous 12 months, traders nonetheless have a chance to exit the inventory at a revenue. However that window is beginning to shut. Cameco’s inventory remains to be buying and selling at 130 occasions earnings, so now may be a superb time to promote.