It's been a pretty shoddy start to the trading week for the All Ordinaries Index (ASX: XAO) and most ASX shares this Monday. At the time of writing, the All Ords has lost a meaty 0.66%. But that hasn't stopped two ASX uranium shares from bucking the markets and not only rising today but hitting new 52-week highs.
Let's discuss.
First up we have Paladin Energy Ltd (ASX: PDN).
Last week, Paladin shares closed at 96 cents each. This ASX uranium share opened at that same price this morning, but soon rocketed up 2.59% to 99 cents, the level we are currently seeing. That's also the new 52-week high for the Paladin share price.
Then we have Devex Resources Ltd (ASX: DEV).
Devex shares closed at 38 cents last Friday but opened at 41 cents this morning before climbing up to 42 cents soon after open. That was a gain worth more than 10% at the time and 42 cents is now Devex's new 52-week high. Sadly for investors, someone got cold feet, and the company has since retreated from this new high. At present, Devex shares are going for 37 cents each, down 2.9% for the day. Talk about volatility.
Nevertheless, that new 52-week high still counts.
So what's going on with these two ASX uranium shares this Monday that have prompted these new 52-week highs in the face of such a weak broader market?
Why are these two ASX uranium shares at new 52-week highs?
Well, it's not hard to see why. As we discussed last week, uranium prices climbed sharply over August, and are currently sitting at a decade high.
To understand why, here's an extract of the World Nuclear Association's forecasts that we discussed last week:
World reactor requirements for uranium in 2023 are estimated at about 65,650 tU [tonnes of elemental uranium]. In the Reference Scenario these are expected to rise to almost 130,000 tU in 2040, with requirements rising to 184,300 tU in the Upper Scenario and nearly 87,000 tU in the Lower Scenario by the same date.
So uranium supplies are constrained at the same time that demand is increasing. Although not present in Australia, many countries around the world are turning to the nuclear power industry to help with the energy transition away from fossil fuels. So things seem to be looking good for the uranium sector. As such, it's no surprise to see these ASX uranium shares at new highs this week.
But does that mean it's worth buying into the likes of Paladin Energy and Devex Resources?
Why I'm not buying uranium stocks today
While this all looks promising for uranium shares, I'm not buying Paladin, Devex or any other uranium companies.
At the end of the day, uranium shares are just like any other commodity stocks – highly dependent on the externally controlled prices of the minerals they mine. That makes these kinds of companies inherently weak in my view. Their fortunes are inextricably tied to something outside their control.
All commodities tend to go through boom and bust cycles. Yes, uranium is hot right now, and there seems to be plenty of upside left in the tank going forward. But we don't know that. Anything could happen to uranium prices over the coming years. There could be a global recession which tanks global uranium prices. Some countries could accelerate their renewable energy programs and replace nuclear power with solar or wind technology.
Additionally, the world is unfortunately no stranger to safety incidents when it comes to nuclear power. It was only in 2011 that Japan had the disastrous Fukushima nuclear disaster – which it is still recovering from today. That incident saw Japan turn away from nuclear power and towards alternatives.
So I do not accept that permanently higher uranium prices are a done deal. As such, I am staying away from ASX uranium shares, no matter how bright the outlook may appear. I simply think there are better companies out there for compounding wealth over decades.
