Supply shortages due to production cuts led to a rally in uranium last year. But now that mines are gradually resuming operations, an increase in supply has been driving a decline in uranium prices lately. And because the industry is running into hurdles regarding environmental risks and a regulatory slowdown, uranium prices may continue to retreat. Considering this, we think Cameco (NYSE:CCJ), NexGen Energy (NYSE:NXE), Denison Mines (NYSE:DNN), and Energy Fuels (NYSE:UUUU), which are facing a plethora of uncertainties, are not safe bets right now. Read on.The COVID-19-pandemic-induced halt in the construction of new plants, a series of mine closures in Canada and dwindling secondary supplies fueled a spike in U308 prices in May 2020. However, as of March 31, 2021, the uranium spot price has declined 15.5% to $28.33 since May 31, 2020. With uranium companies reopening their primary mines, there could be a significant improvement in supply conditions this year. As such, uranium prices may slide further in the coming months.
However, with President Biden’s push to reduce carbon emissions and recent failures of traditional green-energy power systems driving investment in new nuclear plants, the uranium shortage seems less likely to occur. Hence, we think the short-term outlook for the metal is uncertain.
This year is expected to witness a reversal of 2020's gains as COVID-19 production issues end and supply returns to normal without a significant increase in demand. Against this backdrop, shares of The Cameco Corporation (CCJ), NexGen Energy Ltd. (NXE), Denison Mines Corp. (DNN), and Energy Fuels Inc. (UUUU) could experience a pullback. So, these stocks should be avoided now.