RE:RE:FCU Super DepositGood observation thiggins. The spot market for Uranium is really unusual. For just about every other commodity the spot price is not that much different to the term price...the diffierence being attributable to storage costs for the material. For some reason that is not the case for Uranium. In terms of pounds of Uranium by far the majority of material is obtained through long term contracts arrangements with a wide variety of formulas. Only a small number of the total pounds is obtained via the spot market....although in recent years this has increased. Trading is almost non-existent so using spot price as a gauge for Uranium value is very suspect. Trading on term contracts is also quite low which means utilities are allowing their contracts to roll off and filling their requirements from small spot purchases and from inventory. In my opinion this is a reflection of the uncertainty in the industry. For example a utility such as exelon where its nuclear plants are having to compete with subsidised electricity may not see the need for a long term fuel contract for a plant that it may have to shutdown. Hence the desire to not contract and the desire to use inventory drawdown for fuelling requirements. Of course that is an oversimplification since this is an internationally traded material. China for example has chosen the route of buying mines plus long contracts with suppliers to meet its needs. That is why it bought Husab and a 25% share in the Langer Heinrich mine.
Another twist to the tale is that enrichers are selling material on the spot market to bolster revenues while they struggle to keep their SWU's in operation so there is a spot supply available that is not normally there. Also remember that only 5 of the original 50 or so Japanese reactors are operating which means that utilities thee have a great deal of Uranium some of which I am sure is finding its way back to the spot market. It is only the miners that want long term supply contracts. The rest of the suppliers are quite happy selling into the spot market.
The key parameter to watch is called the "uncovered requirements" which is the amount of Uranium a utility will need in the future and does not have supply contracts to cover it. My feeling is that this uncoveed requirement has been exaggerrated by forecasters and I do not think it is as large as some say it is.
However the trend (that is what I watch for) is that uncovered requirements are increasing and mined supply is decreasing. Material available for spot sale is also going to decrease as Japanese reactors restart and demand for enrichment increases.
The convergence of all of these trends is what will move the market...plus a suitable catalyst to start the panic buying. We are not there yet...and I think we are two years away.
But as I have said many times here now it is going to occur unless there is some amazing breakthrough in technology that renders current assumptions irrelevant.
So Spot Price is not a very reliable indicator and I think less so lately as other factors have influenced it that were not there before. But...bottom line this is still a supply and demand equation. Demand is increasing and supply is decreasing.
Amazing time to buy at these ridiculously low prices. The patient investor will be well rewarded.
Malcolm