CCJ - Cameco: Uranium Market Hype Clashes With Weakening Fundamentals

2024-03-18 18:09:16 ET

Summary

• Uranium prices surged in 2023 due to supply shortages, but the rally may be unsupported by fundamental data as uranium prices reverse.
• After a sharp correction, the uranium mining complex may be in the pre-crash "denial phase," but a resurgence in speculative buying activity could continue the rally.
• Due to long-term contracts and the supply surge from restarted US uranium miners, Cameco may not benefit from higher uranium prices.
• The uranium market is demand inelastic but has a very elastic supply. Output from North America will likely surge as long as prices near $90/lbs, offsetting any minor growth in global nuclear production.
• While I expect CCJ to lose value in the long term, I would not short it due to the power of retail speculative sentiment among uranium miners. However, I advise investors about the risks of crowd activity in uranium mining stocks.

Going into 2024, one of the hottest trends was the surge in uranium prices. Throughout 2023, most energy commodities were stagnant or lost value, but uranium doubled as supply shortages grew. Although I was an early bullish investor in the uranium mining bull market, having been very bullish from 2019 , the massive rally toward the end of 2023 appeared unsupported by fundamental data. In December, I published a neutral article on the uranium mining ETF, Sprott Uranium Miners ETF ( URNM ), followed by a bearish article on the mining giant Cameco Corporation ( CCJ ) in January....

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