Uranium
Radioactive chemical element that is primarily used in nuclear power generation and military weapons.
- Two primary uses: Civilian Power Plants & Defense
- As of 2018, the USA imports over 90% of its uranium
- This could be a security risk as this is used for nuclear power reactors and nuclear powered navy ships
- Much of the USA's imported uranium comes from Russia, Kazakhastan, Australia and Canada
- Uranium prices in the United states could jump if laws/restrictions/tariffs are put in place to spur US production
- Uranium Junior Mining is a Relatively Small Industry
- Demand Can Easily Be Forecast Years ahead of time (unlike other commodities)
- Supply and Demand and Price Changes tend to move slowly because the industry is so slow:
- A new plant can take 2+ years of planning and then 8-10 years to construct (new demand)
- An old plan usually gives de-commissioning notice 4-5 years in advance (drop in demand)
- This predictability allows you to forecast years in advance
- Therefore, imbalances and price changes usually are driven by the supply of uranium
- To major producers are responsible for the majority of supply: (60% world production 2019)
- Kazatomprom from Kazakhstan. Kazakhstan is the worlds largest and lowest cost producer
- Cameco in Canada
- There are only ~40 mines total in the world
- Smaller producers include Australia and Nigeria
- End User Demand Factors (Mostly Powerplant "fuel buyers")
- Tend to make purchases 2-3 years in advance
- After purchase, the uranium needs to be processed into fuel - (go through a fuel cycle)
- 1) Conversion
- 2) Enrichment
- 3) Fuel Fabrication
- 4) Inventory Management
- Buyers tend to move in a "herd mentality" when prices strat to move
- Buyers tend to be price takers
- The US is the largest consumer globally (100 reactors) - this drives price cycles
- France (70% of electricity)
- New demand coming from Emerging Markets (China, India, Russia, etc - where electricity demand is growing)
- Since nuclear power fuels base load (it never turns off), it's important to have enough fuel. A stable supply is required. Plants run 24x7.
- very political & emmotion commodity
- nuclear power is regulated, so regulation can hugely impact uranium demand
- emotions + politcs = high volatility
Nuclear Scares & Disaster Can Negatively Impact Uranium Prices
- These events cause publish disfavor and protests
- Can even cause closure of nuclear plants and/or cancellation of new nuclear project
- Examples include:
- Three Mile Island
- Chernobyl
- This results in reduced demand and a fall in prices
Uranium Minds
- Tend to be very remote - takes multiple flights to get there
- There is little else near them: works tend to live there in shifts of 2-3 week periods
- Is for product traded for delivery within one year
- Tends to have lots of inventory traded back and forth ( is not as big of a market as you'd think)
- Uranium prices tend to follow cyclical patterns
- Rise very high when nuclear power is in favor
- Fall below production costs when nuclear power is out of favor
- 20 year bear market from early 1980s to early 2000s
- Bull market till mid 2000s
- Bear market from mid 2000s to current (2018)
- Sever bear market started after Fukushima Disaster
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Setup for a potential price increase in 2018 & beyond