We often say at MM, “Look after your losers, and the winners will look after themselves.” Hence, this morning, we’ve looked at the two commodities creating the most angst across our portfolios: uranium and coal, both from the energy sector.
In a timely fashion for today’s report, uranium ETFs surged ~7% higher on Friday night after the world’s largest producer significantly cut its production guidance for next year. The move came after Kazakhstan’s national uranium miner, Kazatomprom, slashed its 2025 production target by more than 15% to 25,000 to 26,500 metric tons, compared to 30,500 to 31,500 metric tons.
Uranium is a crucial fuel source for nuclear power plants. Outside Australia, global utilities, national governments, and the tech sector have shown growing interest in nuclear energy as a reliable, carbon-free power source that can supply rising electricity demand while meeting climate goals. Any downgrade is hugely positive for the uranium price in the medium term as the market remains structurally undersupplied, especially from 2026-2029, where there is limited new supply growth.
- We remain bullish on the outlook for uranium prices and the sector and see the recent lull in contracting activity and subsequent pullback in the spot uranium price and uranium equities as an ideal entry point to the sector.
Coal is used in power generation and steel making. In terms of power generation, electrification is underway, and the Asia Pacific region is going through a power investment boom, with US$4 trillion required for new power generation assets in the next decade. This will ultimately have a negative impact on thermal coal demand in time, however, we don’t believe the transition will be seamless, taking longer and costing more than current estimates. This should mean thermal coal prices move higher in the coming years, though, we do prefer the outlook for Coking/Met Coal over Thermal.
With a lack of meaningful new supply coming online, the availability of premium hard-coking coal is a significant concern to international steelmakers—Wood Mackenzie’s coal supply asset data suggests a net drop in premium supply by 2027. In the short term, China’s coal production is rising while its share of electricity generation is declining, resulting in lower import volumes and prices, as we have witnessed through 2024.
- We are conscious that coal is a dirty energy source, but we believe supply-demand dynamics will push it higher in the medium term.
