Sprott’s uranium miners ETF has shot the lights out over the past six months as governments pivot to the prospect of nuclear power once again.
The HANetf Sprott Uranium Miners UCITS ETF (URNM) has jumped 52.1% over the past six months, as at 19 September, and a rapid 27.2% gains over the trailing month.
Leading this has been the price of uranium shooting above $65/lb for the first time since the Fukushima Daiichi reactor incident in 2011, which prompted governments to U-turn on nuclear initiatives and flood the market with their uranium inventories.
However, John Ciampaglia, CEO of Sprott Asset Management, noted several governments have turned back to nuclear as part of their transition to low-carbon energy, with Japan already starting 10 plants for the first time in over a decade.
Elsewhere, South Korea, Belgium, Sweden and the Netherlands have all “pivoted back” to nuclear, Ciampaglia said, while the US, UK, France, Canada and India have announced plans to build more capacity, Ciampaglia said.
In the short-term, uranium has displayed relative strength versus other commodities which have pulled back on weak Chinese economic data, owing to the underinvestment in stockpiles of the metal over the past decade and 170 nuclear plants currently under construction.
Speaking on the 436 plants currently in operation, Tom Bailey, head of research at HANetf, said high uranium prices are “not likely” to lead to demand destruction.
“Uranium represents 4-8% of a nuclear plant’s ongoing costs meaning nuclear power plant fuel buyers are price inelastic,” Bailey said.
“For most nuclear power plants, shutting off the reactor due to a lack of supply would incur a higher cost than accepting elevated market prices.”
Ciampaglia predicted supply-demand mismatches will continue to support uranium prices over the long-term.
“The current uranium price, despite more than doubling over the past two or so years, remains below incentive levels to restart tier two production, let alone finance greenfield development,” he concluded.
After launching last April as the second uranium ETF available in Europe, URNM has claimed the top spot as the largest in its product class with recent performance seeing it break the $100m assets under management (AUM) mark.
Tracking the North Shore Sprott Uranium Miners index comprised 82.5% of uranium miners and 17.5% of physical uranium trusts provides the ETF with a high beta to the uranium extraction side of the nuclear value chain.
This contrasts with competitor strategies from Global X and VanEck which capture nuclear subsectors including engineering, which explains URNM’s 14% outperformance versus its peers over the past six months.