Uranium Week: Speculation Implication

Weekly Reports | Apr 27 2022

The spot uranium price tumbled last week, reflecting general financial market volatility.

-Uranium spot price plunges -16%
-Traders the major sellers
-Uranium has become a financial instrument

By Greg Peel

Metal and mineral markets have always been subject to speculation, but this is mostly evident in futures markets which can be settled for cash rather than physical markets, which require delivery and storage of the metal/mineral.

A couple of decades ago, when the uranium price was soaring on the earliest, and premature, signs of the death of fossil fuels, a uranium futures contract was listed. It never took off however, because by then the spot uranium price had begun to retreat rather rapidly.

In the past couple of years, the spot uranium market has been tracking an accelerating path back to the levels last seen before the Fukushima disaster, which appeared to spell the end of nuclear power.

The long rally has not been driven by end-user restocking per se, but rather a step-up in non-user speculative physical trusts which buy and hold physical uranium as a financial instrument.

Most recently the Sprott Physical Uranium Trust (SPUT) has dominated such investor speculation, often solely responsible for weekly spot price gains even as new nuclear reactors are being commissioned.

But the problem of speculators in any market is that they can push markets up in bubble-fashion but the end result is the potential for sharp pullbacks when speculators start to panic.

The spot uranium market is not familiar with -16% falls in a week, but that’s what happened last week when industry consultant TradeTech’s weekly spot price indicator dropped -US$10.25 to US$53.30/lb.

Financial Market Impact

There was no uranium-specific trigger for the fall – indeed the push to net-zero and the supply constraint potential from Russian sanctions suggest uranium demand should remain elevated. It was simply a case of all financial markets taking a “risk-off” tumble, and uranium has evolved into a “financial market”.

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