Miners and Equipment Manufacturers to Watch

  • A combination of geopolitics and climate change is fueling a resurgence in the nuclear sector.
  • The urgency to move away from fossil fuels has increased significantly since the start of the war in Ukraine.
  • Uranium fuels nuclear power plants and is expected to see a spike in demand as the energy transition accelerates.

Nuclear power has certainly seen dark days, but a combination of geopolitics and climate change is poised to fuel a resurgence in the sector.

Two disasters have marred nuclear power plants for many people; Chernobyl in Ukraine in 1986 and the most recent earthquake-triggered leak at Japan’s Fukushima power plant in 2011.

However, the reality is that the number of disasters relative to the number of nuclear power plants in operation is tiny, and technology and safety procedures have come a long way since the Chernobyl explosion.

The urgency to move away from fossil fuels has increased dramatically in recent years, as warnings about climate change have increased and major concerns about the behavior of some of the world’s major oil producers have become very clear, as in the case of Russia’s attack on Ukraine.

Western democracies are finding it increasingly untenable to fund some of the oil-exporting regimes for humanitarian reasons, adding to already growing concerns about climate change.

Nuclear technology can arguably offer the best of both worlds. It can be scaled to produce reliable amounts of energy comparable to fossil fuels, while having negligible carbon emissions, like wind or solar power. And there are opportunities for investors in the sector.

“Climate change and the shift to other energy sources without greenhouse gas emissions has been the main driver that has brought nuclear more to the fore,” said Rohan Reddy, director of research at Global X ETFs, which has more than $40 billion. in assets under management.

“The other reason, I would say, is because of the latest issues in Europe and the just awareness of Russian dependence on natural gas. We could probably argue that over the past 20 years geopolitical tensions have been relatively exacerbated compared to other past periods. Russia is probably the best example of this,” he said.

He added that with nuclear power generation having zero greenhouse gas emissions during operation, countries looking to reduce their fossil fuel footprint will inevitably do so through nuclear to some extent. measure, even if it is expensive at the start, because it is very difficult to do so. thanks to renewable energies such as wind alone.

“You would think that renewables would be a viable solution, but they are quite expensive and often dependent on subsidies. So at the moment it is difficult to implement changes using exclusively renewables due to both cost and reliability,” Reddy mentioned.

“One good thing about nuclear is that once the power station itself is on, it can be relied on for a long time without any operational issues. This is not the case with solar power. and wind. For obvious reasons, like with solar power, you need the sun to be constantly out there and for the wind, you need the wind to be flowing out there.”

When we talk about nuclear energy, we are of course talking about uranium. It’s the material that’s used to create the reactions needed to produce nuclear energy and it’s something that investors could very well target, Reddy explained.

He said the current price per pound of uranium is hovering around the $60 mark, which could lead to a 30-40% rise over the next year as demand increases. Over the past three years, U.S. uranium futures have gained about 110%, more than twice the 49% gain of benchmark Brent crude oil futures.

There are various exchange-traded funds in the market that can offer exposure to the price of uranium and the companies that produce it, including one run by Reddy’s company; the Global X Uranium ETF.

“Uranium itself can be very illiquid as an asset and difficult to expose,” Reddy explained. “So most people when they enter this space are trying to buy individual stocks or ETFs. Directionally, you can get a sense of where investor sentiment is going based on the flows of ETFs and stock prices.”

Beyond that, Reddy suggested investors target a basket of stocks closely tied to both uranium production and nuclear power plant infrastructure.

On the uranium mining side, Reddy chose a producer from Kazakhstan Kazatompromwhose shares also trade in London, a heavyweight in the nuclear industry Camecothe Sprott Physical Uranium Trust and listed in London plc yellow cake.

Turning to other parts of the nuclear power industry and Reddy tipped South Korean equipment suppliers Daewoo Engineering and Construction, Hyundai Engineering and Constructionand Doosan Heavy Industries and Construction. Another name he chose is CGN PowerChinese nuclear power group.


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