A combination of a substantial rise in production and growing global demand has helped the uranium industry rebound this year. And, since uranium prices are expected to continue moving higher in the near term, we think energy ETFs exposed to uranium stocks Global X Uranium ETF (URA) and North Shore Global Uranium Mining ETF (URNM) should soar in price. Read on.The COVID-19-pandemic-induced halt in the construction of new plants, a series of mine closures in Canada, and declining secondary supplies have limited the growth of the uranium industry. However, according to GlobalData, global uranium production is expected to grow at a 6.2% CAGR to 65.2kt by 2025. Resumption of production at Cigar Lake Canada, which accounts for 12-13% of the global uranium output, and several other mines, should drive the growth.
Furthermore, last week the spot uranium price hit $35/lb for the first time in six years, when Sprott Physical Uranium Trust (SPUT) started buying and storing physical uranium in expectation of a sustainable recovery. The optimism surrounding the industry’s recovery is based on a combination of current demand from the world's 445 currently operational nuclear reactors, which provide roughly 10% of global electricity, and the development of new reactors as demand for carbon-free electricity grows.
Given this backdrop, we think ETFs exposed to uranium stocks—Global X Uranium ETF (URA) and North Shore Global Uranium Mining ETF (URNM)—could be solid bets now because they are well-positioned to witness significant upside.