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Uranium - Trading with commodities

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How retail investors can trade uranium

Investors rarely associate the metal uranium with trading. Uranium is a radioactive metal that is used in the economy and in the military for a variety of purposes. Investors themselves can also profit from the uranium industry with uranium CFD trading, uranium stocks and uranium ETCs.

Since the raw material uranium is particularly hyped these days, the following article will therefore deal with the topic "How can small investors trade uranium". Among other things, the use of the raw material uranium in the economy, its influencing factors in the price formation as well as the individual trading opportunities will be discussed in detail.


What are the current uses of uranium as a raw material?

Uranium in itself is a radioactive and toxic metal, which is dangerous to humans due to its radiation and toxicity. High doses of uranium over a long period of time can damage the internal organs as well as the genetic information of humans.

Nevertheless, uranium is used - under heavy safety precautions - in industry and in the military for a variety of purposes and is of correspondingly great use. In the following subsections, the main uses of uranium in nuclear power plants, for radiation protection, and in nautical and military applications will be described in more detail.


Use in nuclear power plants

In nuclear power plants (or nuclear power stations), the uranium isotope U(235) in particular is used to generate energy. For this purpose, the corresponding isotope - only about 0.72 percent of which occurs naturally in uranium - must first be extracted from the uranium and enriched separately. An average nuclear power plant needs about 20 metric tons of uranium per year - in terms of volume, this amount would fit into a standard mid-size car. However, this is the uranium that has already been enriched, which is why about 200 metric tons of uranium per year and nuclear power plant are needed as the starting material. Through nuclear fission and the resulting chain reaction, thermal energy is initially generated in the nuclear power plant, which is then converted into electrical energy.


Use in radiation protection

In addition to its high energy density, uranium also has an extensive absorption effect, which is why uranium is also used in many places as a shielding material in radiation protection. For example, special depleted uranium is used as a trim weight in aircraft or even as a keel weight in high-performance sailboats.


Use in nautical and military

In nautical applications, uranium is mainly used in atomic icebreakers, which have so-called pressurized water reactors. They require cold seawater for cooling and can therefore only be used in the Arctic and Antarctic. The consumption of a typical nuclear icebreaker is about 200 grams of enriched uranium per day, which means that nuclear icebreakers with a load of 250 to 300 kilograms of uranium can remain at sea continuously for about 4 years.

In the military sector, uranium is primarily used for uranium munitions - and mainly for armor-piercing munitions. The impacting ammunition, consisting of depleted uranium, atomizes after hitting the target and then burns explosively. Enriched uranium, on the other hand, serves as a source material for use in nuclear weapons and as a primer for hydrogen bombs.


This is how large the world's uranium deposits and production are

The global production of uranium in 2019 amounted to about 54,000 tons, of which the countries of Kazakhstan, Canada, Australia, Namibia and Niger produced a large part. Thus, the above countries produced quantities in the following constellation:

In 2019, global deposits amounted to around 1.30 million metric tons of uranium, some of which has not yet been mined - more than half of which is located in the two countries of Kazakhstan and Australia. Based on the current annual production of uranium, the current uranium reserves will last for another 25 years or so, which should result in a short- to medium-term increase in uranium commodity prices. This is due to the constantly dwindling supply and the simultaneous increase in demand for the raw material.

What are the main factors influencing price formation?

Over the past 1.5 years, the price of a pound of uranium has ranged from $27.50 to as much as $34. When looking at the figures, it quickly becomes clear that the raw material price for uranium is sometimes subject to large fluctuations. It may therefore be worthwhile for investors to know the most important factors influencing the development of the uranium price. In the following subsections the most important factors for the formation of the uranium price shall be shown to the reader. Only so much: An important factor was already mentioned - the demand!

Factor 1: Rising demand in the emerging markets

Around 70 nuclear power plants are currently under construction worldwide - the majority of them within the emerging markets of Russia, China as well as India. And the generation of low-cost nuclear power is also becoming increasingly popular in other, emerging countries.

While the age of nuclear power seems to be coming to an end in the industrialized countries - especially after catastrophes such as Chernobyl or Fukushima - emerging countries are now increasingly relying on nuclear power plants. Around 2.4 percent of the electricity produced in China today comes from nuclear energy - and the trend is still rising!

The huge country plans to cover up to 6 percent of its electricity consumption with nuclear energy in the coming years. Thus, the number of nuclear power plants worldwide is expected to increase significantly over the next 20 years, which will naturally lead to increased demand for uranium.

Factor 2: Raw material deposits

About 90 percent of the world's uranium needs are now met by uranium mines around the planet. About 10 percent comes from so-called recycling plants for uranium (or also called "reprocessing plants"). The largest producing countries, Kazakhstan, Australia and Canada, cover the lion's share of the world's annual demand of around 60,000 metric tons. According to estimates, however, the world's uranium reserves still amount to around 1,300,000 metric tons. However, these are only the deposits that can be explored from today's perspective.

Here are a few more facts about the potential uranium deposits on Earth (but they are not yet mineable):

  • Approximately 13,600,000 tons of uranium are still believed to be "undiscovered".
  • about 4.500.000.000 tons of uranium are dissolved in sea water
  • approximately 40,000,000,000 tons of uranium is located within the continental crust of the earth

The global uranium deposits (and thus the "supply" component) are therefore very difficult to identify and often cause large price fluctuations on the market. As soon as new deposits are discovered, the supply increases accordingly and thus the price decreases. Of course, ever better recycling methods also have a not inconsiderable influence on price formation.

Factor 3: Political decisions

Political decisions also play a major role in the pricing of uranium. They can intervene decisively in market mechanisms. Particularly within the industrialized countries, demand for uranium - for energy production as well as for other purposes - is falling in some places. In Germany, for example, this is due to the energy turnaround, as a result of which fossil and nuclear energy sources will disappear from the electricity mix in the future, or have already disappeared. Accordingly, political decisions can have a significant influence on the demand for uranium as a raw material, which of course also has an impact on price formation.

Is there seasonality in the price of uranium?

The uranium market also tends to exhibit a certain seasonality. For example, the price of uranium is often very low in the northern hemisphere during the summer months (14). This is due to the fact that uranium companies usually maintain annual to multi-year contracts. As the calendar year draws to a close, uranium companies often have to "dump" large quantities of uranium onto the market to meet their individual contract performance obligations.

On the other hand, they may have to buy back large quantities - whenever there are production restrictions. During the winter months, the price of uranium is therefore often higher than during the "summer lull".

Uranium price forecast: How will the uranium price develop until 2025?

The ongoing construction of further nuclear power plants and the declining (mineable) global uranium deposits mean that the price of uranium could tend to rise within the next few years. With climate change and increased demand for CO2-free power generation, nuclear power plants are also likely to become more interesting again. New nuclear power plants would increase demand for uranium.


How can uranium be traded now?

Since uranium is a radioactive and harmful heavy metal, it cannot be bought in physical form or traded by private investors. Nevertheless, there are numerous opportunities for private investors to profit from the continuing boom in uranium as a raw material. For example, potential investors have access to uranium CFDs, uranium ETCs and uranium shares of global uranium mining companies.

These can be traded - like other financial products on, for example, precious metals - quite normally via a CFD, ETF or stock broker. In order to qualify for trading with uranium, it usually requires no more than its own securities account with a broker of choice. In the following subsections, the individual trading options with the commodity uranium will therefore be explained once in detail.

Uranium CFDs

In the field of CFD trading, potential investors currently only have CFDs on relevant uranium shares at their disposal. CFDs are basically contracts for difference in which the potential investor does not acquire ownership of the actual share, but speculates on its price trend.

Thus, the latter can either hold the uranium CFD "long" to speculate on rising prices or "short" to speculate on falling prices. The commodity uranium is best suited for CFD trading overall, as these have relatively easy to predict seasonal fluctuations.

Uranium ETFs

Currently, there are also a number of ETFs (or "Exchange Traded Funds") that address the issue of uranium trading. For example, the "Global X Uranium ETF" is a good opportunity to invest in a diversified uranium market. The ETF itself invests in a comprehensive range of global companies involved in uranium mining, respectively the production of nuclear components.

However, the "Global X Uranium ETF" can only be traded by institutional investors and is not available to retail investors. However, the most important index in the uranium sector is the "Solactive Global Uranium & Nuclear Components Total Return Index".

Risk note XTB: 73% of CFD retail investor accounts lose money.

Mining investor Eric Sprott's new fund launched in 2021 caused a stir in the uranium market, sending the price of uranium soaring from $30 to $40 per pound of uranium. His uranium fund "Sprott Physical Uranium Trust" (ISIN: CA85210A1049) is the first fund of its kind to offer investors the opportunity to physically invest in uranium. This gives investors and for the first time the opportunity to trade uranium directly without having to store the physical uranium themselves.

Uranium shares

The largest selection of trading opportunities in relation to the raw material uranium is certainly in the area of uranium shares. These are, for example, mining companies as well as processing uranium companies and also recycling companies for uranium.

Here are the 5 currently most promising companies in the uranium industry:

  1. Cameco
  2. Energy Fuels
  3. Denison Mines
  4. Uranium Energy
  5. Kazatomprom

Cameco Corp (WKN: 882017) - or "Canadian Mining & Energy Coporation" - is a Canadian-American-Kazakh mining company responsible for around 18 percent of global uranium mining. The share currently offers a dividend yield of around 0.25 percent as a small plus.

Energy Fuels Incorporated (WKN: A1W757) is a US uranium production center. It is located in the US state of Utah and is considered the largest uranium mill in the country. The company produces around 4,000 tons of enriched uranium per year.

Denison Mines Corporation (WKN: A0LFYS) is a Canadian uranium mining company that mines uranium in northern Saskatchewan, Canada.

Uranium Energy Corporation (WKN: A0JDRR) is engaged in the mining of uranium, the processing of uranium concentrates and the implementation of comprehensive projects in the uranium environment. The company's activities are focused on the US states of Arizona, Colorado, New Mexico, Wyoming and Texas.

Kazatomprom (WKN: A2N9D5) - or "National Atomic Company Kazatomprom JSC" - is considered the world's largest producer of natural uranium. The company is headquartered in Kazakhstan and produces about 20 percent of the world's uranium.

All advantages of uranium CFD trading at a glance

Due to its various factors influencing price formation and its tendency to increase in demand, uranium offers a few advantages for the retail investor in terms of CFD trading.

Thus, retail investors can take advantage of the volatile nature of uranium in CFD trading as follows:

  • seasonal ups and downs of the uranium price (can therefore be traded "long" as well as "short" in the short term)
  • Rising demand in emerging countries ensures an increase in the price of uranium in the medium term
  • Uranium price often linked to earnings volume of mining companies
  • Uranium price thus strongly dependent on news and published production reports
  • Private investors can leverage uranium CFD trading with debt (more equity return)
  • Positions can be secured by various order commands such as "stop-loss" or "take-profit" (or even reduced/increased during the trade)

Conclusion on trading uranium as a private investor

All in all, uranium turns out to be an exciting alternative to the commodities otherwise preferred by private investors, such as cocoa, orange juice, and also to the precious metals silver, gold or platinum. Uranium is currently experiencing a great deal of hype, as both the demand on the market is increasing and the supply is becoming significantly scarcer.

Today, private investors have a wealth of options at their disposal to enter into trading with the raw material uranium either directly or indirectly - via CFDs, ETFs as well as shares. Experts believe that uranium will become a much more popular commodity on the stock exchanges in the coming years and will gain a firm foothold alongside gold and other commodities. 

Risk note XTB: CFDs are complex instruments and involve a high risk of losing money quickly because of the leverage effect. 73% of retail investor accounts lose money trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.