The price of uranium could be about to take off and ASX stocks producing the energy commodity might be set to benefit, according to a major broker.
Macquarie's equities division has reportedly flagged political unrest in Kazakhstan as a potential driver of uranium spot prices. That's because the Central Asian country produces around 40% of the world's uranium.
The broker is said to have reiterated its outperform rating on the Boss Energy Ltd (ASX: BOE) and Paladin Energy Ltd (ASX: PDN) share prices as a result of the now-eased tensions.
Let's take a closer look at what Macquarie is expecting from ASX uranium shares.
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Why is Macquarie bullish on ASX uranium shares?
According to reporting by The Australian, after spot prices of uranium surged 7% to US$46.35 per pound over the last week, the top broker is concerned about the market's reliance on a few global jurisdictions.
More than 2 thirds of the globe's uranium is produced in Kazakhstan, Australia, and Canada.
However, a recent conflict in the former Soviet state, which its president is calling an attempted coup d'etat reports ABC News, has piqued the interest of Macquarie Equities.
The broker reportedly believes the unrest emphasised the need to diversify the world's uranium production, which could drive prices higher. The Australian quoted it as saying:
Given the low level of utility contracting currently, we believe that a price rally would induce contracting for surety of supply which would result in an increase of contracting driving up uranium prices in the near to medium term.
In the longer term, we expect price support new supply requires incentive pricing above US$55/lb.
Right now, the share price of ASX uranium producer Paladin Energy is up 0.27%, trading at 94 cents. Meanwhile, the Boss Energy share price is $2.42, 2.5% higher than its previous close.
For context, the S&P/ASX 200 Index (ASX: XJO) has slipped 0.51%. At the same time, the All Ordinaries Index (ASX: XAO) is down 0.44%.
