Why are ASX uranium shares so hot right now?

There is a significant political debate going on today about the role nuclear energy might play in Australia's future.

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Another day, another set of 52-week highs for ASX uranium shares!

Most uranium miners are rising on Tuesday, in contrast to the rest of the market.

The S&P/ASX 200 Energy Index (ASX: XEJ) started the day higher but is now down 0.19%.

The S&P/ASX 200 Index (ASX: XJO) is down 0.59%.

So, why are uranium stocks so hot of late?

Let's investigate.

ASX uranium shares rising strongly on Tuesday

Here's the state of play among this sample bunch of ASX uranium shares in lunchtime trading:

  • The Boss Energy Ltd (ASX: BOE) share price is up 2.96% to $4.87
  • The Deep Yellow Limited (ASX: DYL) share price is up 5.81% to $1.275
  • The Paladin Energy Ltd (ASX: PDN) share price is up 4.31% to $1.09
  • The Bannerman Energy Ltd (ASX: BMN) share price is up 4.35% to $2.88
  • The Peninsula Energy Ltd (ASX: PEN) share price is up 1.67% to 12.2 cents
  • The Elevate Uranium Ltd (ASX: EL8) share price is up 8.65% to 56.5 cents

Today's 52-week highs, at the time of writing, are Bannerman Energy shares at $3.01; Elevate Uranium shares at 58 cents, Deep Yellow shares at $1.31, Boss Energy shares at $4.90, and Paladin Energy shares at $1.11.

Why are uranium stocks so hot?

ASX uranium shares have been on a northwards surge since May, alongside a big lift in the uranium price.

Uranium is one of very few commodities projected to rise in value over the next five years.

Currently, the uranium price is US$65.50 per pound.

This is the highest price seen since the Fukushima nuclear accident in Japan in 2011.

Trading Economics analysis says "strong demand from physical fund speculators" is supporting uranium prices.

It says:

Signs of increased demand for nuclear fuel drove the Sprott Physical Uranium Trust to restart purchasing, lifting prices abruptly due to the market's thin nature.

SP Angel mining analyst John Meyer says uranium prices are expected to rise to between US$75 to US$80 per pound by the end of December.

He says they could keep rising for up to two decades from there.

Meyer told Reuters:

The market has been slowly building higher prices as mining costs rise and nuclear generators look to build stocks to guard against increasingly risky supply-side issues.

We see prices rising year-on-year for next 10-20 years or till the world finds another source for large scale uninterruptible base load power with a low carbon footprint.

The nuclear energy debate in Australia

Many countries are embracing nuclear energy as part of their green energy transition. Nuclear energy is CO2-free.

Most of these countries have existing nuclear energy industries. In Australia, nuclear energy is banned.

The federal coalition has been arguing to include nuclear energy in the mix for Australia's own transition.

The Albanese government disagrees and says we should just get on with developing our renewable energy industry.

The coalition has not yet declared an official policy in this regard.

However, Labor has pre-empted this by releasing costings for replacing Australia's coal-fired power plants with small modular reactors (SMRs).

The modelling suggests it would cost $387 billion.

The chair of the Net Zero Australia Steering Committee, Robin Batterham, says the cost of developing a nuclear energy industry in Australia would likely come down over time.

If it does, then nuclear power "would have a role" but currently, it is "just not in the race".

The debate about creating a local industry matters little to ASX uranium shares. These companies have plenty of overseas customers interested in their uranium stock.

Fund provider BetaShares says higher demand amid low supply is among six trends driving ASX uranium shares higher today.

Motley Fool contributor Bronwyn Allen has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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