SPOT MARKET THOUGHTS
FROM ….
https://www.fnarena.com/index.php/2020/05/05/uranium-week-biggest-price-surge-in-thirty-years/
This is a problem ….
"TradeTech reports 22 spot transactions totalling 2.6mlbs U3O8 equivalent were reported in the week ending May 1. TradeTech’s weekly spot price indicator has risen by US70c to US$33.90/lb.
The month of April saw 76 deals completed totalling 9.4mlbs U3O8 equivalent, up from 6.8mlbs in March. From end-March, the spot price rose US$6.45 to US$33.75/lb."
2.6 M lbs per week is the equivalent of 135 M lbs per year – at that rate the spot market is providing approximately the pounds that are planned to being mined in 2020.
9.4 M lbs per month translates to 113 M lbs per year.
At these rates of supply being available I’m guessing that most utilities don’t see the need to negotiate long term supply contracts. I’m thinking Denison and other mine developers need to lock in term contracts with utilities to get decent rates with the lenders.
Every so often the good people at Fnarena.com put the numbers out into the public domain, give us a glimpse at the transactions taking place. Been watching this for several years and what has been “normal” as reported on Fnarena’s site usually ranges between 40 to 50 M lbs per year.
Used to be that the paradigm was for most transactions to be contracted at mid and long term prices, say prior to Fukushima era and I recall that in total spot market transactions were the equivalent of less than 20 M lbs per year.
In the old days prior to 2007, Denison was a producer generally doing about 2 M lbs per year and had a range of contracts mid and long term. On some they eventually were underwater relative to the spot but at least they could make money on what they had – kind of were forward sold or maybe even classed as being negatively hedged.
Some have “reported” that the excessive spot trading was the result of traders trading the same pounds back and forth. I don’t think so any more.
Somebody out there continues to flood the spot market. Why? Attempting to drive out competition and “corner” the market ? If it is the Kazaks, which is likely, then it may also be that the government can’t afford to shut down or delay production because they need the currency.
If Denison’s ISR works for Phoneix – all this doesn’t matter so much and we can join the Kazaks in flooding the spot market.
Just my thoughts – B2S2