The army of short sellers targeting uranium stocks was scrambling to cover its positions on Friday following reports that US President Donald Trump was about to sign executive orders that aimed to jumpstart the nuclear energy industry as soon as Friday (Saturday AEST).
The orders are set to ease the regulatory process for the approval of new reactors and strengthen fuel supply chains, Reuters reported. Trump is also expected to invoke Cold War-era legislation to declare a national emergency over America’s dependence on Russia and China for enriched uranium.
The news lit a fire under local uranium stocks, which are set to benefit from the US shifting its reliance away from big producers Russia and China and to alternative sources such as Australia.
Boss Energy surged 12.1 per cent to $3.98, Deep Yellow 8.3 per cent to $1.25 and Paladin Energy 6.7 per cent to $5.77.
Perennial portfolio manager Sam Berridge said the majority of Friday’s rally was fuelled by hedge funds, which had been heavily targeting the local uranium sector but were now forced to cover their short positions.
“The moves you’re seeing today reflect the fact that the sector is heavily shorted, so they’re going to be more sensitive to any positive news in the space,” Berridge told The Australian Financial Review.
Short sellers, who look to profit from a falling share price, are required to buy shares to cover their position and close the short. This can lead to what is known as a “short squeeze”, when the surge in buying activity can result in an outsized spike in the share price.
Indeed, uranium companies have been heavily targeted by traders amid a fall in the price of the commodity, declining hopes that artificial intelligence will need huge amounts of power, thanks to more efficient models such as China’s DeepSeek, and tougher regulatory barriers.
Although Boss Energy remains the most heavily shorted stock on the ASX, the percentage of shares held by short sellers has dropped to 21.7 per cent from a peak of more than 26 per cent on April 9. Paladin, the second-most heavily shorted stock, dropped from 17 per cent to 15.6 per cent over the same period.
Uranium stocks were among the hottest on the sharemarket following Russia’s invasion of Ukraine. The need to reduce reliance on Russian gas and uranium morphed the following year, in 2023, into concerns about supply shortages as nuclear power became a more attractive option as the world moved away from coal.
The spot price soared to a 12-year high as utilities locked in contracts. But prices have since slumped from $US100 ($157) a pound last year to $US64 a pound in April. Uranium was trading around $US70 a pound on Friday.
ETF Shares chief investment officer David Tuckwell said Trump’s executive orders would be a “double whammy” for uranium prices – more retail investors will flock to the metal, while it would also force more short sellers to cover their positions.
Source: Financial Review
