Day traders push uranium prices up
The enthusiasm of individual traders is reshaping the nuclear fuel market which generates one-tenth of the world’s electricity and drives up uranium-related stocks.
After languishing for a decade after the Fukushima disaster led Japan and Germany to shut down nuclear reactors, spot uranium prices soared to $ 47.10 a pound from $ 32.25 in early August . They remain below their peak of $ 137 in 2007, according to price tracker UxC LLC.
US-listed shares of Canadian uranium company Cameco Corp.
jumped more than 20% in October and nearly doubled in 2021. His Canadian mining colleague Denison Mines Corp.
jumped 25% this month and almost tripled this year. Uranium Energy based in Texas Corp.
climbed 17% in October.
Behind the rally: A surge in uranium prices driven by individual traders, who have flocked to a new confidence that offers a cheap and easy way to bet on the nuclear fuel market. The Toronto-listed trust, led by Sprott Asset Management LP, has twice raised new cash from its shareholders and has sourced uranium since the summer. Its shares climbed to $ 12.49 on Monday, up 49% from their inception in July.
Sprott’s purchases are helping to drain a glut of uranium that built up after the Fukushima disaster in 2011. Stop-and-start purchases by the trust led to sharp price swings with little or no justification based on it. on fundamentals such as the supply of mines or the demand for public services, according to traders.
“These periods of intense volatility will become the norm,” said Hyder Ramatala, vice president of commerce at UG USA, a unit of French nuclear fuel company Orano SA. New vehicles for betting on uranium prices will push price peaks up and troughs down, he added.
Uranium stocks rose again this week after the world’s largest producer, Kazakh state-backed miner Kazatomprom, launched its own uranium fund in partnership with Kazakhstan’s central bank and Genchi Global Ltd. , an Emirati investment company. The fund will start with $ 50 million and plans to raise up to an additional $ 500 million from institutional or private investors.
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Fluctuations in uranium prices echo stock exchanges, including AMC Entertainment Holdings Inc.
and GameStop Corp.
, which has drawn a strong following among the individual day traders who congregate on Reddit.
Even more than struggling video game stores and movie chains, uranium is an unlikely candidate to be rocked by a burst of retail cash. Utilities, miners, specialty traders and a group of hedge funds and banks, including the Goldman Sachs group Inc.
have long dominated the market.
Most U3O8, a lightly processed form of uranium that has not yet been enriched and turned into fuel rods, is sold under long-term agreements. Futures rarely change hands.
The sleepy market has accelerated. Traders estimate that between £ 70million and £ 90million will be traded in 2021, up from £ 50million in a typical year.
A big question for traders and investors is whether utilities, which have been quiet in the market this year, are starting to source uranium in anticipation of a prolonged rise in prices.
There are temporary signs starting to show up.
Two utilities, the Tennessee Valley Authority and Argentina’s Nucleoeléctrica Argentina SA, launched uranium supply bids on Monday, sources familiar with the matter said. A third, STP Nuclear Operating Co. in Texas, has asked market participants to buy fuel without a formal tender, the people said.
A spokesperson for TVA said the bidding was part of a routine process to determine market conditions. An STP spokeswoman declined to comment. The Argentinian utility did not return requests for comment.
Individual traders are not the only ones placing money on uranium. Fund managers including MMCAP International and Anchorage Capital Group, the hedge fund that agreed to sell the movie studio behind James Bond to Amazon.com Inc.
in May, bought physical fuel in a bet on higher prices, the Wall Street Journal reported. Some uranium bulls say nuclear power will play a role in efforts to move away from fossil fuels, boosting demand.
A spokesperson for Sprott said family offices, hedge funds and other institutional investors have bought the majority of the new units recently issued by the trust.
Shares of a third investment vehicle for physical uranium, Yellow Cake PLC, have jumped 54% in London this year. The fund said it plans to take delivery of £ 2million of uranium from Kazatomprom between October and December, bringing its overall holdings to nearly £ 16million.
“We have never seen this before in the uranium market,” said Amir Adnani, managing director of Uranium Energy, of the Kazakh and Sprott fundraisers. “In the long run, it has to be bullish. “
Write to Joe Wallace at [email protected]
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