Uranium Rally Is a High-Stakes Bet on Future of Nuclear Power

After languishing at historical lows for the better part of the last decade, uranium suddenly came back from the dead.

Prices have surged about 40% just in September, outpacing all other major commodities. In just a few weeks, millions of pounds of supply was scooped up by the Sprott Physical Uranium Trust. It’s a massive bet on nuclear energy’s prominence in a carbon-free future. The problem is -- at least for the investors who poured more than $240 million into the fund -- the debate is still raging over whether and how nuclear can come to the forefront.

Atomic energy became somewhat taboo after the Fukushima disaster in Japan, with opponents saying the 2011 meltdown was only the most recent accident to demonstrate that reactors are too dangerous. And while nuclear power is carbon-free, it has drawn opposition from some progressives and environmentalists who have qualms about radioactive waste. There are now only 50 reactors under construction worldwide, a 20-year low, according to Chris Gadomski, lead nuclear analyst for BloombergNEF.

Gadomski’s view of the red-hot uranium rally? “Everybody is getting played,” he said.

Indeed, just as quickly as uranium skyrocketed, prices now seem to be hitting the brakes. Futures traded in New York on Tuesday fell as much as 9.8%, before paring the losses to close the day 0.3% lower at $49.75 a pound.

Producer stocks that got swept up in the frenzy seem to have peaked. Cameco Corp. has dropped more than 13% since touching a decade high last week. And the world’s top uranium miner Kazatomprom has warned that the recent price action was being fueled by financial investors rather than the utilities that use the radioactive metal as fuel in their reactors.

Driving the speculation was the new Sprott Physical Uranium Trust. Since mid-August, the fund has amassed a uranium stockpile so big it’s equal to about 16% of the annual consumption from the world’s nuclear reactors, according to data as of Monday.