Uranium spot prices have done better than gold in recent years, more than tripling since 2020 from USD 26 to USD 80 per pound - and were briefly above USD 100 earlier this year. Indeed, prices for a three or five year contract are above spot prices, in the 90s.
The drivers include growing use of and building of nuclear reactors, limited supply that is forecast to decline, and the need for green energy.
China, India and Russia are all building many new reactors over the coming years and decades.
Geopolitical tensions make it much less likely that nuclear weapons can be recycled as sources of supply, and President Putin has raised the spectre of restricting uranium exports. Though Russia only accounts for about 5% of global uranium supply – ranking below Kazakstan, Namibia, Canada, Australia and Uzbekistan – in a tight market, a small imbalance between supply and demand can provoke an outsized price move.
Nuclear plays a key role in the green energy transition. Whereas renewables such as wind, solar and hydro are weather dependent and can be intermittent, nuclear is well suited to providing steady and predictable baseload power generation.
Themes ETFs has a relatively low-cost Uranium and Nuclear themes ETF: Canada-listed Themes Uranium & Nuclear ETF (URAN), which tracks the BITA Global Uranium and Nuclear Select Index (BGUNSI).
This includes uranium miners, explorers, and uranium power producers, mainly listed in the US, Canada or Australia, though there are also holdings in China, Hong Kong, UK, Japan and Spain.
US utility Constellation Energy is the largest holding, followed by Canada’s biggest uranium miner, Cameco with another Canadian name, UEC, also in the top ten. An earlier stage Canadian explorer developing a uranium mine, NexGen energy, is also present as is Australia’s producer and explorer, Paladin Energy. Small modular nuclear reactor designer, NuScale Power Corporation, is the third largest name.
There is also a holding in London listed Yellow Cake, which directly owns over 21 million pounds of uranium sourced from Kazatamprom, a producer in Kazakstan.
URAN’s expense ratio of 0.35% is below average for a sector specialist thematic ETF. This is half the price of Global X Uranium ETF (URA), which has five of the same names in its top ten. VanEck Uranium and Nuclear ETF charges 0.64%, but only has three of the same names as URAN in its top ten. Investors might want to research and compare the portfolios. Sprott Uranium Miners (URNM), charging 0.75%, offers a purer play on miners, physical uranium and royalties, without the utilities.
Since URAN has only just launched investors may also look at other products to get some feel for sector performance. URA has roughly tripled since 2020, while NLR and URNM have roughly doubled. This performance difference is around 100% over three years whereas a 0.35% fee saving adds up to 1% over three years.