Japan Triggers a Surge in Uranium
Uranium, clean energy, psychedelics, and lithium ETFs competed to secure a spot on the last week’s Canadian top-performing ETFs list.
Last week’s top performing ETFs included uranium and clean energy ETFs, driven by supply-demand imbalances and the Japanese government hinting at a potential nuclear power comeback. Moreover, lithium ETFs experienced some strengthening propelled by a tight commodity supply, while psychedelics ETFs made it to the top of the list.
Uranium Soars as Japan Plans to Move Back into Nuclear Power
Japan has kept most of its nuclear power facilities idle since a tsunami-driven earthquake provoked a nuclear meltdown at the Fukushima power plant in March 2011. Last Wednesday, Japan's Prime Minister Fumio Kishida hinted that the situation might be reversed. He stated that Japan is considering restarting idled plants while developing next-generation reactors. The efforts are believed to be undertaken to strengthen the country’s energy security and lower carbon emissions. The Prime Minister’s comments are nothing but further affirmation of the growing demand for nuclear energy as the world is moving away from fossil fuels.
On the other side of the Pacific, the “Inflation Reduction Act” allocated USD$369 billion to reduce carbon emissions. Elsewhere in the European continent, several nations are revisiting their plans to shut down or phase out nuclear energy. Against this backdrop, the price of uranium futures soared and stabilized around USD$49/lbs while stocks of uranium miners and producers traded higher. For example, Cameco Corp (CCO), one of the world’s largest uranium producers, went up 17.56% from USD$29.55 on August 22nd and August 26th on the Toronto Stock Exchange. ETFs tracking the uranium sector performed strongly last week. The Horizons Global Uranium Index ETF (HURA), which holds in its portfolio CCO (20.30%) and other uranium miners and producers, ranked first amongst the Canadian top-performing ETFs. It has jumped 13.04% over the last week.
Similarly, clean energy ETFs benefitted from the positive developments in the sectors. Kishida said, “nuclear power and renewables are essential to proceed with a green transformation. Russia’s invasion changed the global energy situation.” The First Trust Nasdaq Clean Edge Green Energy ETF (QCLN) secured a spot on the list, having risen 3.89% last week.
ETFs in play:
Lithium Demand Outpacing Supply, Again
Lithium is at the heart of the global shift to electric vehicles (EVs). This red-hot commodity’s demand continues to outpace supply by a wide margin. Lithium stocks skyrocketed last week, driven mainly by three factors: recently released customs data, a power crisis in China, and the “Inflation Reduction Act” in the United States. For instance, the Shanghai Metals Markets release new data pointing out a 108% year-on-year increase in the nation’s lithium carbonate imports. This indicates that the rebound in economic activity renewed the demand for new energy vehicles.
Additionally, primary lithium-producing regions – Sichuan, for example – suspended operations following a record heatwave and severe drought, disrupting supply in an already tight market. On another front in the United States, the passing of the “Inflation Reduction Act” is set to increase the demand for electric vehicles as the Act extends tax breaks for new electric vehicle purchases. Lithium-tracking ETFs benefitted from the recent price surge and secured one slot on the top 20 ETFs in Canada. The Horizons Global Lithium Producers Index ETF (HLIT) surged 7.86% last week.
ETFs in play:
Cannabis ETFs Break the Pressure
Psychedelics, cannabis, and marijuana ETFs have been under pressure for a while. Last week, three ETFs tracking the sector managed a breakout and landed second, third, and seventh positions on Canada’s top-performing ETFs. The Horizons Psychedelic Stock Index ETF (PSYK) posted 8.24% gains, followed by the Purpose Marijuana Opportunities Fund (MJJ), which rose 8.22%. Similarly, the Horizons US Marijuana Index ETF (HMUS.U) generated 7.53% of returns in the final week of August. The relatively good performance can be attributed to numerous factors ranging from German legislation closing in soon to Costa Rican President unveiling plans for recreational cannabis law.
ETFs in play:
Data for this article is as of August 26th, 2022.
