Uranium prices have plunged disastrously in recent years, falling more than 80 percent from $136 per pound in 2007 to around $25 today. And investors say prices are unlikely to get low enough to fire up demand anytime soon, according to The Wall Street Journal. The steady price decline has surprised executives even in the nuclear power industry, once regarded as a climate-friendly alternative and a key contributor to the world's energy supply by supply by 2020. (See also: Top 2 ETFs With Exposure to Uranium.)
Grim ETF, Stock Outlook
That outlook has had a dramatic impact on investments tied to uranium.
Global X Uranium ETF (URA), for example, is the only fund focused on global uranium companies according to ETF.com, and it has experienced the same price volatility as the metal itself. The fund reached its peak one year after inception in 2011 at $132.12, but is now down to $13.25 per share.
And Cameco Corp. (CCJ), one of URA’s top holdings, has seen its stock price drop from a high of $55.60 in 2007 to $8.73 in September, 2016. The same has happened to other uranium equities such as Uranium Energy Corp. (UEC) and UR-Energy Inc (URG).
There are several reasons why the price is likely to stay low for triuranium octoxide – the form of uranium often sold to plants.
Nuclear Disaster Risk
One factor is Japan's Fukushima Daiichi disaster, when a tsunami damaged several nuclear reactors, resulting in a 30 square kilometer evacuation zone in the area in 2011. Parts of the area are still restricted to the public.
There also were unforeseen market consequences of a deal between Russia and the U.S. where the two countries would sweep almost 10% of of triuranium octoxide off the market. Prices were expected to rise, but many centrifuges instead added more capacity, further pushing down prices.
Despite the dire outlook in the West, China is boosting demand for nuclear energy as it expands electricity use across the nation. Though China is building a large percentage of all reactors now under construction, that won't be enough demand to fuel a recovery in uranium's prices.