ASX uranium shares had a lacklustre day along with the rest of the market on Tuesday.
At the closing bell:
- Deep Yellow Limited (ASX: DYL) shares were down 3.9% to $1.48
- Boss Energy Ltd (ASX: BOE) shares were down 2.93% to $3.65
- Paladin Energy Ltd (ASX: PDN) shares were down 1.92% to $12.76
- Bannerman Energy Ltd (ASX: BMN) shares were down 1.5% to $3.29
- Peninsula Energy Ltd (ASX: PEN) shares were steady at 11 cents
This compares to a 1.66% fall in the S&P/ASX 200 Index (ASX: XJO) today.
What's been happening with ASX uranium shares?
After a strong run in 2023, ASX uranium shares have come under pressure as the uranium price has weakened.
As this chart shows, 2023 was a fantastic year, with stocks buoyed by a rapidly rising commodity price.
The uranium price soared from under US$50 per pound (pp) in January 2023 to more than US$105 pp a year later. This happened because nuclear energy became a hot topic in the world of investment.
More countries are investing in nuclear energy as part of their green energy mix for the future.
And none more so than China, which is building 22 of the 58 nuclear reactors under construction worldwide today.
Of course, this means demand for uranium will rise as nuclear energy is embraced over the long term.
All that excitement came undone this year when the uranium price began to fall amid higher supply.
What's changed for the uranium price in 2024?
The commodity price has fallen gradually this year. It has declined from above US$105 pp in early February to about US$82 pp today.
The fall in the commodity price has led to volatility among ASX uranium shares this year, as shown below.
But things are looking up.
Many ASX uranium shares have been lifting since early September "as the uranium price found support after a sustained period of weakness", according to Blackwattle Investment Partners.
In a recent update, Blackwattle Small Cap Quality Fund portfolio managers Robert Hawkesford and Daniel Broeren said they are optimistic about the outlook for the uranium price over the next few months.
The fund is invested in Paladin Energy shares, which rose by 18% in September alone. This made the ASX uranium share one of the main positive contributors to the fund in September, the managers said.
The uranium price is now trading close to two-month highs, which has supported ASX uranium shares.
Since 30 August:
- Bannerman Energy shares are up 44.4%
- Deep Yellow shares are up 35.8%
- Paladin Energy shares are up 30.4%
- Boss Energy shares are up 28.9%
- Peninsula Energy shares are up 27.5%
Investors have also bought ASX uranium shares after Microsoft (NASDAQ: MSFT) and Amazon (NASDAQ: AMZN) recently announced plans to invest in nuclear power for their future artificial intelligence needs.
Trading Economics analysts say the demand outlook for uranium has become a bit more bullish.
Tailwinds include news from China, with economic stimulus likely to support demand for energy, while an easing in monetary policy would likely support further investment in nuclear power.
But there's another factor that Blackwattle says should support the commodity price in the final months of 2024, with positive implications for ASX uranium shares.
Seasonal increase in uranium trading ahead, say analysts
Hawkesford and Broeren said the weakness in the uranium price over the first half of 2024 "largely reflected a lack of contracted volume for physical uranium as utility buyers held back".
They anticipate a repeat of 2023 trends in which most of the contracted volume of uranium was traded in the second half of the calendar year. This activity provided a tailwind for the uranium price.
Hawkesford and Broeren said:
However, as was the case in 2023, most of the contracted volume was transacted in the back end of the calendar year after the annual World Nuclear Symposium (September), which brings together the largest buyers and sellers. We anticipate the same trend in 2024 and have used the recent weakness in PDN's share price to increase our position size.
