If it seems like everyone is talking about ASX uranium shares lately, there's a good reason.
Last week uranium prices hit 15-year highs, trading for just over US$80 per pound. That sees the price of the radioactive metal, a critical element in nuclear power production, up 55% so far in 2023.
And it's put a rocket under Australia's leading uranium stocks.
Here's how these four producers and explorers have performed year to date:
- Paladin Energy Ltd (ASX: PDN) shares have gained 54%
- Bannerman Energy Ltd (ASX: BMN) shares are up 66%
- Deep Yellow Limited (ASX: DYL) shares have gained 59%
- Boss Energy Ltd (ASX: BOE) shares are up 118%
For some context, the All Ordinaries Index (ASX: XAO) has gained 1% so far in 2023.
Here's why ASX uranium shares have been catching tailwinds.
Why everyone's talking about ASX uranium shares
The uranium market has been caught in a classic supply and demand imbalance, sending prices surging.
After a lengthy pause in the wake of Japan's Fukushima disaster, many of the world's top economies – including China, the United States, India, Japan, and the European Union – are embracing nuclear energy to meet their carbon reduction plans while delivering reliable energy.
That's the demand side that's been helping boost ASX uranium shares.
On the supply side, explorers and producers have yet to catch up with the changing market dynamics.
Colin Hamilton, managing director for commodities research at BMO, noted (courtesy of Mining.com), "Utility contracting continues to pick up. [But] there is very little uncommitted production available to meet uncovered utility requirements."
Despite the surge in uranium prices this year sending ASX uranium shares rocketing, there could be more outsized gains to come.
According to Steven Schoffstall, director of ETF product management at Sprott Asset Management:
When you look over the longer term, there is a severe supply-demand imbalance that we see developing. If you go out to 2040 or so, you see about a cumulative 1.5-billion-pound shortfall in the supply of uranium. So, we think over the longer term, that's going to be conducive to much higher prices in uranium."
Indeed, the International Energy Agency (IEA) forecasts global nuclear capacity will need to double by 2050 to reach humanity's emissions goals.
How about Australia?
ASX uranium shares are well placed with their operations in Australia.
According to Geoscience Australia, the continent has the world's largest Economic Demonstrated Resources (EDR) of uranium.
But to date, Australia hasn't joined in the growing number of nations turning to nuclear energy for emissions-free power.
That position doesn't sit well with opposition energy and climate change spokesman Ted O'Brien.
"There is no credible pathway to net zero without nuclear energy," O'Brien said (quoted by The Australian).
Commenting on the COP28 summit taking place in Dubai he added:
This COP is the first time that we are expecting a major communique signed by our closest allies and partners (on nuclear energy) and Australia won't even be in the room…
If you look at Ontario in Canada, over the last few months they have quadrupled their order for small modular reactors. The UK are going hard on a mix of both small modular and large reactors…
The world is embracing a diversified mix understanding the importance of baseload technology and they're opting for zero emissions nuclear.
Australia's reluctance to embrace nuclear power certainly hasn't held back ASX uranium shares this year.
And the ongoing enthusiasm saw Bell Potter recently increase its target for the Boss Energy share price to $5.53. That represents a potential upside of more than 24% from current levels.