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Why are ASX uranium shares charging higher today?

The Motley Fool logo The Motley Fool 6/01/2022 Zach Bristow
a close up of a keyboard: rising asx uranium share price icon on a stock index board © Provided by The Motley Fool rising asx uranium share price icon on a stock index board

Shares in ASX uranium players are gaining support to start the year in 2022 and are outpacing their benchmarks.

Whereas the S&P/ASX 200 index (ASX: XJO) has slipped just under 2% in the red to 7,423 points today, several ASX uranium shares are surging and are well ahead of the broad index.

For instance, both Paladin Energy Ltd (ASX: PDN) and Bannerman Energy Ltd (ASX: BMN) are in the green and have climbed 3% and 5% on the day respectively.

Not to mention Lotus Resources Ltd (ASX: LOT) and Deep Yellow Ltd (ASX: DYL) share prices’ that are 3% and 5% higher on the day as well.

What’s got ASX uranium shares charging higher today?

Deadly protests stemming from the world’s largest producer of uranium, Kazakhstan, are leading to a jump in prices for the radioactive metal.

Kazakhstan produces more than 40% of the world’s uranium, and right now is facing unrest amid the greatest challenge to the country’s leadership in years according to reporting from Bloomberg.

Prices of the radioactive metal have surged this year and are now 48% higher on the year trading at US$45.40 per pound.

For producers, any increase in spot prices is likely to be a net positive to margins and revenue, given the higher prices fetched for the metal.

For others without the pricing power, there may be hidden challenges. However, uranium surged nearly 8% on Wednesday, as “the potential for this to create a shortage is what people are now trading on” said Jonathan Hinze, president of UxC LLC to Bloomberg.

From August to September alone spot and futures for uranium shot up more than 65% to a high of US$50.80/lbs, amid a reshuffling of energy investments from state giants in Canada and the EU.

Specially, the EU has recently moved ahead with plans to accept some nuclear projects as sustainable, as an incentive to drive investment into the space.

With these supply/demand mechanics in place, price takers listed on the ASX are seeing the price hikes reflected positively in their share prices today.

What to expect next?

Given the world’s exposure to uranium from Kazakhstan, the civil unrest is causing jitters amongst market participants overnight.

Any shutoff of supply chains out of Kazakhstan would result in severe shortages of the metal if it were a prolonged period.

Alas the market is pricing the new risk to uranium supply in curious ways this week. On some foreign exchanges, shares in uranium players have taken a hit, whereas the segment is outperforming on the Australian markets today.

With respect to Kazakhstan, Russia said it will send “peacekeeping forces” alongside its allies in the Collective Security Treaty Organization after the Kazakh President appealed for assistance.

Only time will tell as to how traders will evaluate how to play the situation coming out of Kazakhstan, although the threat of an “expected” shortage looms.

The price of uranium is down more than 1% for the month but is on track for a fast rebound at the current pace of recovery.

The post Why are ASX uranium shares charging higher today? appeared first on The Motley Fool Australia.

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The author has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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