Is the uranium sector poised for growth in 2022?

Today, uranium exposed stocks including one of the largest producers Cameco (CCJ.US) are gaining. Other uranium producers like Uranium Energy Corp (UEC.US), NexGen (NXE.US) or Denison Mines (DNN.US) also moved higher. Meanwhile, shares in the world's largest uranium ore producer Kazakhstan's Kazatomprom (KAZ.UK) are down almost 4% due to geopolitical risk factors.

In recent months, commodities have attracted the attention of both investors and the public mainly due drastically rising energy prices. The ongoing war in Ukraine and sanctions against Russia only accelerated this process. Due to the escalation of military conflict Europe has changed its previous economic relations by drastically cutting itself off from Russia. The policy of the key EU country Germany has also been overturned by cutting off the Russian elite, agreeing to exclude Russia from the SWIFT system and sending arms to the embattled Ukraine. Until now, Russia has been one of the largest suppliers of conventional raw materials such as coal and natural gas. 

Europe therefore appears to be forced to shorten its path to energy independence, and nuclear energy may play an important role. France supports this conception, and other countries declare their desire to develop nuclear power plants, including Poland. It is speculated that Germany, until recently oriented towards Russian gas, may also become pro-nuclear in the face of high energy prices, the blockade of Nord Stream 2. It is also possible that gas supplies from Russia will be reduced or completely suspended by the German blockade of Nord Stream 1 or the Russian response to sanctions. 

The main fuel for nuclear power plants is of course uranium, and the current situation seems to be comfortable especially for the American and Canadian producers. Although Kazakhstan has not agreed to support Putin in the war in Ukraine, supplies of Kazakh uranium ore to the West are likely to be reduced to the minimum necessary. However, this does not pose a strategic threat to the Kazakh giant, which has signed contracts with China and is stepping up cooperation with it. China plans to build dozens of new nuclear power plants in the coming years. Due to political reasons, Kazatomprom may not sign any significant contracts to supply the EU or the UK. 

Europe does not have significant uranium resources and is dependent on imports from other countries. Rio Tinto and BHP Billiton have recently marginalised the share of uranium ore production within their operations and have no chance of meeting the demand of all European nuclear power plants. This makes it likely that North American companies could become significant suppliers of uranium ore to Europe, particularly if France's Orano and Britain's Yellow Cake also fail to keep up with timely deliveries of reactor fuel.

Canada's Cameco, the largest uranium producer in the 'West', has confirmed work on the development of SMR (Small Modular Reactors) technology and confirmed the readiness of the McArthur River and Kay Lake mines to produce at full capacity. Following the release of its Q4 report, the company also raised its dividend per share by 50% with assurances of improved future earnings and strong operating capabilities. Cameco currently has 6 'Buy' recommendations and 2 'Hold' recommendations according to analyst ratings provided by Marketbeat, with a price target of around $27

One of the few U.S. uranium companies that holds a significant stockpile of this commodity is Uranium Energy Corp. Company currently has an analyst rating of 'Buy' and a price target of $7 according to analysts provided by Marketbeat which further indicates positive sentiment around the nuclear sector among investors.

From a technical point of view, UEC.US price managed to break above the downward trendline and is approaching the upper limit of the 1:1 structure at $3.6. Should break higher occur, the upward movement may accelerate towards $4.30 Source: xStation5