CHART: Uranium stocks vs spot price – something’s gotta give

The uranium market had a lot going for it at the start of 2014:

The prospect of a Japanese nuclear reactor restart.

The end of the Russia-US megatons to megawatts program last August, eliminating a huge source of supply.

China’s accelerated plan to approve six to eight plants a year through 2020; part of its war on pollution.

The possibility of a rethink in Germany about phasing out nuclear (coal is the only viable alternative and Putin’s gas is becoming dearer).

As the stars aligned for a pickup in global uranium demand so did investors for uranium stocks.

But the rapid run-up in uranium shares – especially developers – didn’t turn out to be a leading indicator.

The spot price continued to slide going below $30 a pound to levels last seen in 2005. That dragged the long term price, where most uranium business is conducted, down to $45, a six year low.

Uranium stocks have now come down to earth as this chart from Haywood Securities show.

The independent investment dealer with $5 billion under management says now that the spot price appears to have found something of a floor, the sell-off may begin to slow down.

But the Vancouver-based firm cautions that the shares of producers and developers “remain at or above their indexed price point of 12 months ago, when spot uranium was $40.70 U₃O₈, a 40% premium to current spot”.

There may be more pain ahead.

Source: Capital IQ, UxC, Haywood

Image of German electronic band Kraftwerk performing Radioactivity by Franz Schuier.