The American Uranium Market Is Poised for a Major – and Profitable – Change

If U.S. companies are provided any relief from the White House, those publicly traded will see their stock values pop.

This month, the U.S. Department of Commerce was due to put a recommendation involving the domestic uranium market on President Trump’s desk.

He would have 90 days to act on it.

Depending on what happens, the domestic uranium market could become very different very quickly.

At the center of the drama is whether U.S. uranium miners will be granted relief from foreign competition under Section 232 of the Trade Expansion Act of 1962.

The most direct way this could be done is for the president to decree that uranium is a national security material, although the uranium companies that brought the action have been requesting something less – a quota of usage inside the country reserved for U.S. production.

You would think that would be the case, given the need for uranium in the national arms and naval vessel reactor sectors. That at least is recognized.

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U.S. law requires that uranium used for national defense purposes – in nuclear-powered naval vessels, for example, or to replenish nuclear warheads – must be mined, refined and processed domestically.

Unfortunately for the U.S. mining sector, those sources are not new production but defense stockpiles resulting from the Cold War years.

There have been come concerns advanced over the technical reliability of this material. Some of it is seriously out of date.

Not to mention other concerns…

The (Lack Of) Reliability in U.S. Uranium Production

Another concern is that the mining and processing of uranium within the U.S. for power generation is almost entirely mothballed.

This results from two considerations that would seem to enhance a “national security” finding under §232.

First, on pricing considerations, imports from former Soviet Kazakhstan have increasingly been the main source for U.S. generating plants.

Other foreign sources include Canada, Australia, Russia, and China, with the Chinese production levels likely increasing to fuel its own expanding number of domestic reactors.

American power plants are now receiving some 98% of their fuel from foreign sources, with well over half of the volume now coming from nations hardly considered friendly to the U.S.

In contrast, from what was once a vibrant industry throughout the 1950s and 1960s, there are probably today only about 500-600 workers in all of U.S. uranium production. The 2% remaining from the entire domestic market demand comprises the only actual new U.S.-based production taking place.

As I shall explain presently, however, even that small amount is no longer under U.S. company control…

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The Ever-Present Geopolitical Factors

And that brings me to the second and certainly most highly politicized consideration, involving the position of Uranium One.

This company is headquartered in Toronto but is a subsidiary of Russian atomic energy giant Rosatom.

Uranium One owns U.S.-based uranium mining locations and they currently have a stranglehold on production inside the U.S.

While the Canadian decision allowing the Toronto company’s sale to the Russians did not require Washington’s permission, the Russian control of U.S. uranium mines through Uranium One did.

That occurred in the Obama Administration and Hillary Clinton signed off on it as Secretary of State. Alleged later contributions to the Clinton Foundation and a $500,000 speaking fee in Moscow from Rosatom for Bill Clinton didn’t help with the politics either.

Three years of investigation on the “pay for play” allegation netted nothing but that has hardly stopped conservative discussion blogs from keeping the issue visible.

I have no interest in descending into such a partisan political maelstrom. Today’s column focuses on something else.

In addition to controlling the uranium space in Russia, Rosatom has been absorbing the trade in Kazakh-sourced uranium.

Kazakhstan is ramping up production and providing it at discount prices to discourage competition. And to enhance it as the preferred source for U.S. reactor use, Uranium One (i.e., Rosatom) has been keeping its American mines closed to facilitate the use of Kazakh uranium in the U.S.

So, this looks like an easy choice for Trump:

Protect U.S. companies; prioritize U.S. production inside the country; prevent further foreign monopolization of a necessary fuel source for electricity generation; restrict yet another Obama era decision (Uranium One effectively controlling the domestic uranium market); and declare it all as a national security matter.

Well, not so fast.

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A Profitable Upside in this Argument

Last year when Commerce announced it would consider the petition from two American uranium companies that it exercise a 232 action, it was required to send the proposal out for comment. Negative reactions almost immediately flowed in.

These are coming from both individual American power plants and an association of commercial power producers called the Ad Hoc Utilities Group (AHUG). The power plants are strenuously objecting to any action. Their objection is basic.

They argue that requiring that they buy even a portion of the uranium needed for the rectors from U.S. mines would dramatically increase the cost of the electricity resulting. Even the proposal from some mining interests that a domestic quota of only 25% be set up is too much for the utilities. Turning this into a national security issue sets them off even more.

Some utility representatives also counter that it makes no difference who owns Uranium One.

If the company agrees to offer fuel at the same discounted price, either directly from its U.S. mines and/or having the mines acquire Kazakh imports at transfer prices and then sell the product downstream domestically, the uranium in question is “American.”

Behind the scenes there has been considerable lobbying on both sides. Discussions with my contacts and with executives at U.S. companies likely to be affected confirm that both present and former members of Republican administrations (Trump, Bush 1 and Bush 2) have been enlisted to support both sides in the §232 argument.

So, now it’s a waiting game. We will see what Trump chooses to do.

But one conclusion is already clear.

If U.S. companies are provided any relief from the White House, those publicly traded will see their stock values pop.

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