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Uranium stocks have been experiencing a significant upsurge, driven by notable performance from companies such as Paladin Energy, Boss Energy, and Deep Yellow, which have seen increases ranging from 50% to 80% since early April. This surge correlates with a rebound in uranium prices, which recently peaked at a three-month high of US$71 per pound, rebounding from an 18-month low recorded in March. The rise in prices has been partly attributed to positive shifts in the wider commodity and equity markets following President Trump’s tariff announcements and ongoing trade negotiations.
The upward movement in uranium prices gained significant momentum on 23 May, when President Trump enacted executive orders aimed at revitalising the US nuclear energy sector through the Defence Production Act. These measures are designed to reduce dependency on foreign uranium, particularly from nations like Russia and China, by easing regulatory barriers, encouraging domestic uranium mining and enrichment, and enhancing nuclear power initiatives for national security purposes. Following the announcement, uranium stocks like Paladin and Boss experienced increases of between 8% and 12%.
Adding to the optimistic outlook, Meta has entered into a 20-year power purchase agreement with Constellation Energy, which involves a commitment to supply 1.1 gigawatts of power from the Clinton nuclear facility starting in June 2027. Meta’s interest in developing new nuclear power projects further underscores the increasing demand for uranium.
A Significant Development from China
A noteworthy development came from China on Wednesday, where the China General Nuclear Power Group (CGN) secured a three-year uranium supply agreement with China Nuclear Fuel. This contract stipulates the delivery of over 1,200 tonnes of uranium (around 3.12 million pounds of U3O8) annually from January 2026 to December 2028.
The contract structure specifies that 30% of the supply will be priced at a base rate of US$94.22 per pound (adjusted for inflation), with the remaining 70% linked to spot market prices upon delivery. In contrast, CGN’s previous agreement for 2023–2025 had a fixed price of US$61.78 per pound for 40% of the supply, with 60% tied to spot markets.
Implications of the Price Hike
The base price of US$94.22 per pound under this new contract is significantly higher—52.5%—than the previous agreement and well above the current spot price of about US$70 per pound. This has important consequences for the uranium market:
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Tight Supply, Rising Demand: The premium pricing reflects expectations of a constrained uranium supply and an increase in demand, particularly from China’s expanding nuclear power sector.
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Upward Price Pressure: The elevated fixed price and the spot-linked pricing model could exert upward pressure on both spot and term prices, potentially establishing a higher price floor and managing spot market volatility.
- Geopolitical Considerations: China’s efforts to secure a stable domestic supply could indicate apprehensions about heavy reliance on foreign uranium amid escalating geopolitical tensions or possible export restrictions from major producers such as Kazakhstan and Canada.
Contango Trade Benefits
The price structure established through this contract enables a lucrative contango trade, where traders purchase uranium at current spot prices while selling futures or term contracts at a premium:
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Wider Contango Spread: The term price of US$94.22 creates a substantial gap over current spot prices, allowing traders to profit from buying low and selling high.
- Increased Trading Activity: Anticipated high term prices may stimulate speculative trading activity, with entities like Sprott Physical Uranium Trust or Yellow Cake PLC acquiring physical uranium at spot prices, which could effectively tighten the supply and drive spot prices closer to term prices, ultimately lifting overall prices.
Market Response
Despite the generally positive news impacting the uranium sector, the Global X Uranium ETF noted only a modest increase of 1.0% on Wednesday evening, while most local uranium stocks closed down on Thursday. This muted market reaction may suggest a greater focus on macroeconomic factors rather than the developments specific to China.
In summary, the recent movement in uranium stocks and prices appears to reflect a significant shift in both supply dynamics and market sentiment, with geopolitical elements playing a crucial role in shaping the future of this sector.
