Uranium futures is you have pushed in the trailer supply valveone of the few contracts that has experienced price gains in recent weeks, as the economic impact of COVID-19 continues to weigh heavily on prices for most commodities.

Front-month

uranium futures

settlement prices have traded up to $32.50/pound in late April, compared with around $24/pound in early March, when most of the world's advanced economies began shutting down

In contrast to the bull run on uranium, prices for most energy products have sharply declined since the shutdowns began, while prices for industrial metals like copper and steel have also been under pressure amid low end-user demand.

Fundamental Shift

Electricity consumption has held up relatively well in the slowdown caused by the virus.  As a key power generation fuel, uranium has been less impacted by the spread of the virus than other commodities that are used more for transport or construction.

Uranium also benefits from a

supply-demand balance

that is relatively supportive at present.  COVID-19 has emerged as a threat to global uranium supply.  Indefinite mine closures in Canada, Kazakhstan, Australia and other countries are expected to drive the price of

U3O8 uranium

higher as utilities fight to secure supply and producers either turn to market purchases or draw down on inventories in order to meet contractual obligations.

On March 23 Cameco, a Canadian uranium producer, announced that it will be temporarily suspending operations at

the Cigar Lake mine

, home to the largest high-grade uranium deposit in the world.

Kazatomprom, Kazakhstan's national atomic company and the world's largest uranium producer, announced on April 7 that it will be

suspending production nationwide for three months

to slow the spread of COVID-19. In 2019, Kazakhstan accounted for 42% of global uranium production. Supply side disruptions caused by mine shutdowns and suspensions are sweeping across the uranium industry and continue to drive a bullish trend.

In the long-term, demand for uranium is growing, particularly from Asia.  In April 2020, there were 55 nuclear reactors under construction across the globe, 22% of which are in China.  China also plans a further 44 reactors and is considering adding another 168 in the future.

At the same time as demand is increasing, supply has fallen.  A run of consistently weaker prices between February 2011 and December 2017 led some operators to close down mines or suspend operations, reducing uranium output around the world.

New Entrants

The lack of correlation between uranium and other energy and metals commodities is also attracting new participants into the uranium futures markets.  Fund managers and general investors have noted the recent price activity and are beginning to get involved in uranium futures trading, many for the first time.

Story continues

At the same time, the relatively volatile nature of uranium prices in recent years has led to a significant upturn in interest in risk management from electricity producers and project developers that are looking to hedge their fuel price exposure.  The changing nature of the physical uranium market is ensuring that market participants are increasingly focused on managing price risk.

To learn more about options, go to Benzinga's futures and options education resource.

The post Why Uranium Markets Are Gaining Interest appeared first on OpenMarkets.

See more from Benzinga

OpenMarkets Weekly: FX Volatility

European Repo Demonstrates Its Resilience

After Price Wars And A Pandemic, What's Next For U.S. Shale?

© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

View comments

• ·This Day In Market History: Buffett's $3B GE Bet
• ·AG Jennings Names New Leadership Team at Del. DOJ
• ·What You Must Know About PLC S.p.A.’s (BIT:PLC) Financial Strength
• ·Activision Blizzard names Dennis Durkin as CFO
• ·AstraZeneca to Ensure Equal Access to Coronavirus Vaccine
• ·Oil volatile, ends up 2 percent but demand concerns still weigh
• ·Japanese yen soars as 'flash crash' sweeps currency market
• ·Top Ranked Momentum Stocks to Buy for January 2nd
• ·Ducks Unlimited Canada commends Government’s Fall Economic Statement that recognizes nature in Canada’s economic recovery
• ·Westlake Chemical to Gain on Acquisitions & Strong Demand
• ·Does Mediacontech S.p.A. (BIT:MCH) Have A Particularly Volatile Share Price?
• ·One Thing To Remember About The Vital Metals Limited (ASX:VML) Share Price
• ·Drayage update: The Future Of EDI (With Video)
• ·Enterprise Products: 2Q Earnings Snapshot
• ·USDOLLAR Eyes 10,200- AUD Remains at Risk on RBA Policy
• ·Zijin Mining plans to sell $1.2 bln A-shares to fund Nevsun purchase