Investing.com — Bullish signals for prices are emerging as a result of several market dynamics and geopolitical factors, according to analysts at BofA Securities.
The recent uncertainty surrounding the availability of Russian-origin enriched uranium, coupled with concerns about a potential retaliatory export ban by Russia in response to U.S. sanctions, has underscored the critical issue of supply security in the uranium market.
Despite a softer-than-expected market in 2024, with lower activity from U.S. fuel buyers due to geopolitical tensions and a temporary supply increase from Kazakhstan, these factors are expected to drive up uranium prices in the near term.
BofA Securities maintains a bullish outlook on uranium, forecasting persistent market deficits until 2027.
Although they adjusted their near-term price forecasts downward for 2024, marking the third quarter prices at $81.63 per pound and reducing their full-year forecast to $89.10 per pound (a 13% reduction), they foresee a strong recovery in the medium term.
The revised 2025 forecast was only modestly reduced to $115 per pound, while the peak price forecast for 2026 remains unchanged at $135 per pound, an increase from current spot prices.
Several factors contribute to this bullish outlook. One of the key drivers is the increasing reliance on nuclear power as a low-carbon energy source, especially as tech giants like Microsoft (NASDAQ:) sign contracts for nuclear power to meet their growing energy needs in data centers.
This trend not only underscores the vital role of uranium in the global energy transition but also strengthens investor sentiment around uranium equities, which have recently seen renewed interest due to positive developments in the nuclear energy sector.
The anticipated restart of nuclear facilities, such as the Three Mile Island Unit 1 in the United States, along with ongoing supply-side challenges, including pressures on Kazakhstan’s production and the possible restriction of Russian exports, further support the case for rising uranium prices.
With a projected supply deficit continuing through the next few years, BofA Securities suggests that uranium markets are primed for a recovery.
As Cameco (NYSE:), a major player in the uranium space, benefits from these favorable market conditions, BofA has increased its price objective for the company’s shares from $60.50 to $63, flagging the strengthening fundamentals of uranium producers. The combination of these supply constraints, increasing demand for nuclear energy, and geopolitical risks paints a bullish picture for uranium prices moving forward.
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