Uranium Prices Finding a Bottom

By Commodity HQ  AUG 13, 2013 11:44 AM

Since the Fukushima disaster, the price of uranium is down more than 72%. New new safety regulations from Japan could help the commodity finds its bottom.

 


The 2011 Fukushima nuclear disaster sent shock waves not only throughout Japan but also throughout the entire nuclear industry. Many countries immediately cut back on their nuclear production with some even putting plans in place to eradicate it altogether. The swift reaction sent uranium prices into a tailspin that they have yet to recover from. But as 2013 progresses, new legislation and momentum for the nuclear world may finally help uranium find its bottom and give it room to run higher.

Uranium in 2011

The Fukushima disaster, sparked by a devastating earthquake and subsequent tsunamis, occurred on March 11, 2011. It was the largest nuclear disaster since the Chernobyl meltdown of 1986 and only the second disaster to hit a level 7 on the International Nuclear Event Scale. The result sent uranium stocks plummeting as much as 20% in one day and kept the pressure on for more than two years.

Since the disaster, uranium prices are down more than 72% as demand has dropped and outlook has soured. In fact, prices are hovering at levels not seen since the end of 2005. Many investors have been trying to time the bottom of the market to take advantage of the upswing, but prices have continued to struggle, making those efforts even more difficult. Now, Japan has begun to wade back into the nuclear world with new safety rules and regulations that could help uranium finally find its bottom.

Uranium Set to Stabilize

Japan recently introduced a new policy that it figures will make the nuclear world more stable and allow it to still be a major source of energy for the nation; it may also set a precedent in safety that other nations can follow. The island nation “introduced legally binding requirements for nuclear plant operators [to] bolster their tsunami defenses, check for active earthquake faults under their plants, set up emergency command centers and install filters to reduce radioactive discharge from reactors,” writes Josh Kerr.

With these restrictions in place, Japan hopes to have as many as six reactors operational by the end of the year and more as the years go on. While the new reactors likely will not send uranium prices soaring -- inventory levels are simply too high -- it will help the commodity find a bottom to work from. The new safety measures also have the potential to make uranium and the nuclear world more stable for both the energy and investing world.

The road to recovery for this battered commodity will be a long haul, but investors looking to get in on the ground floor certainly have a compelling opportunity right now. Keep an eye on the developments of nuclear plants especially in Japan and be ready to execute when you feel prices hit your target level.

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Editor's note: This article by Jared Cummans was originally published on Commodity HQ.
No positions in stocks mentioned.