With aboveground mobile inventory now snapped up by the likes of the Sprott Physical Uranium Trust (TSX:U.U), Justin Huhn, founder and publisher at Uranium Insider, believes the uranium market has reached an inflection point.
‘The only inventory that exists right now in the world is strategic — this is held by nuclear utilities, and their inventories historically speaking are relatively low, and by nation states,’ he said, adding that he sees a ‘supply black hole’ emerging in the mid-term. That could have major consequences for prices moving forward, as well as for uranium equities.
Emphasizing the fragility of uranium supply, Huhn described it as ‘a big fat question mark.’
‘Finally we’re at this moment in time where the supply side has gotten so squeezed, for lack of a better word, that very, very low-volume demand in the spot market is moving the price significantly — and this is a big wakeup call to utilities,’ he said.
‘We don’t even approach anything resembling a balanced market until we’ve got Dasa producing, Honeymoon producing, all of the US in-situ recovery producing,’ Huhn continued, also mentioning Denison Mines’ (TSX:DML,NYSEAMERICAN:DNN) Phoenix deposit and NexGen Energy’s (TSX:NXE,NYSE:NXE) Arrow project. ‘Best-case scenario, we’re talking five years from now, and even then it’s like a moment in time snapshot — supply maybe reaches that structural demand,’ he added.
And of course, structural demand doesn’t account for inventory builds, or elements like small modular reactors. ‘It’s a structurally undersupplied market, and nobody knows where that relief is going to come from,’ Huhn said.
He encouraged investors not to ‘FOMO into positions,’ and to instead have a steady hand.
‘I think we’re healthily in the next leg up in this market, and the uranium price should continue to move meaningfully higher, potentially into a spike scenario,’ he said. ‘You want to have a seat at the table when that happens — don’t get too cute with trading in and out of positions, just hang on. It’s a volatile ride, but it can be a very, very rewarding sector to invest in for various reasons, and the volatility is one of them. You can’t have the upside volatility without the downside volatility.’
Watch the interview above for Huhn’s full thoughts on the topics discussed above.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.