Uranium Investors Have Become Overly Reactive

Monday’s reaction came after CNN reported that the U.S. government was assessing a report of a leak—not of radiation but of inert gases—at a Chinese nuclear power plant co-owned by two Chinese energy companies and French energy company EDF.

The market response is almost comparable to what happened after the Fukushima nuclear accident in 2011, which led Cameco shares to fall almost 13%. But that turned into a major hit to nuclear-fuel demand affecting the industry for years.

Monday’s drop looks like an outsize reaction for several reasons. Uranium mining companies tend to operate on multiyear supply contracts with utilities, so there is little risk that a nuclear power plant would immediately pull back buying from these mining companies.

Instead, the risk of a nuclear incident is if it saps future demand—either by shutting down the nuclear-power plant in question or if the incident changes governments’ and companies’ decisions to build new […]

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