Justin Huhn: The Uranium Bull Run is Here

Tom welcomes back Justin Huhn to discuss the uranium markets which recently hit a 12-year high. Justin explains that this is significant because it is happening during the slow season for the market and without much involvement from financial players. He also notes that the spot price has been steadily rising on small volumes, which is unusual and could be a sign of a tight market. Justin believes that the recent price increase is not a blow-off top, as some may think, because it is driven by a lack of supply rather than speculative demand. This lack of supply is due to utilities flexing up their contracts and the unwind of the carry trade, resulting in a shortage of uranium for the next four years.

Justin also mentions that there is uncovered demand for 200 million pounds of uranium in the next five years, which is a concern as there is not enough supply to meet this demand. The only entity with enough uranium to satisfy demand is China, but they are also increasing their nuclear capacity, which could deplete their inventories. He predicts that by 2030, China alone will require 70-80 million pounds of uranium per year. Justin also addresses the concern that China may sell their uranium inventory into the market, but he believes that they are more likely to acquire more uranium due to their plans to become a nuclear powerhouse. He points out that the evidence shows that China has been buying uranium this year, not selling it.

Justin explains that the uranium sector is insensitive to price, as it is only a small percentage of the overall operating budget for nuclear power plants. He believes that even if the price of uranium continues to rise, nuclear power plants will continue to buy it in order to keep their plants running. Justin concludes by saying that there is still a long way to go for the uranium market to reach its potential, and that there is no evidence to suggest that China will be a temporary liquidity in the market.

The situation in Ukraine has caused uncertainty and supply risk for utilities, leading them to be more cautious in their contracting. China will likely increase their acquisitions of uranium projects in Africa to meet their demand, as their domestic production is insufficient. The price reporters have started to warn utilities about the supply shortfall and to expect higher prices. The market is facing a near to midterm supply shortage, and it is uncertain if or when this situation will be resolved.

The US remains heavily reliant on Russian uranium deliveries in the near term, but efforts are being made to secure more domestic supply, particularly through developing enrichment capabilities for future SMR demand. However, bureaucratic processes and political factors continue to hinder progress. The spot market has changed significantly in recent years, with utilities now primarily turning to the term market for their needs. Justin also discusses the impact of a broader market sell-off on the uranium sector, stating that while it could cause a temporary dip, his confidence in the market's long-term potential remains high.

Justin's personal approach to trading involves holding long-term positions and avoiding chasing all-time highs. He believes that while the sector may be overbought at the moment, dips are likely to be short-lived if the price of uranium continues to rise. Overall, Justin remains positive about the future of the uranium market and encourages investors to educate themselves and not just follow popular narratives on social media. He also emphasizes the importance of understanding the physical market and the fuel cycle when making investment decisions.

Time Stamp References:0:00 - Introduction0:47 - Uranium's Performance5:40 - Low Volume Big Moves9:24 - Supply/Demand Situation17:33 - Incentives to Sell?