Why is Uranium at $30???? My tortured explination (lol)Compared to other commodities Uranium spot is weird. Certainly you can't compare it to oil or gold. Apparently the price is set by a consulting company. I suppose they phone around and find out what is happening and issue a price.
Seems to me if oil was at an obvious supply imbalance of 5 - 10% it would drive the price to over $200 a barrel. The oil market moves on much smaller imbalances than what are in the uranium market currently. Sometimes oil moves up, or maintains a high price, on small surpluses.
In a way oil and Uranium are not that different in that they are essential to their end users. Without oil the trucks and planes don't move. Same with uranium. Without it the lights go out - which is a rather big bummer if you live in a city powered by a nuclear reactor.
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Meanwhile Nuclear is baseload. That means a 1000 megawatt station is putting out 1000 megawatts at 5 am and the same 1000 megawatts at 5 pm. It’s not dependant on a sunny day or a windy day. It doesn't need acres of expensive (and relatively short lived) battery banks to store power (like wind and solar). Nuclear has a 97% uptime rating. It’s that dependable. Even Hydro is only something like 70% because water flow isn't always that optimal.
So here we are at the beginning of 2021 and Uranium is stuck at $30. This can be attributed to the hangover from the disaster at Fukashima. Nuclear = bad. However that’s not what all the nations building carbon free nuclear reactors are thinking. The industry is growing. That means the need for Uranium is growing. Still if some dumbass like me can figure out that there is a supply imbalance that is only getting worse. I got to ask why is Uranium at $30?????
The only thing I can think of is Utility companies have gotten used to low prices and are simply reluctant to pay higher prices. So ok over that last few years that’s an ok stance to take while you still have some excess inventory but looking out ten years wtf are they thinking? They will need uranium in 2027 and 2031 and 2034 etc.
I really must conclude that nobody want to be first to sign a contract at $55 or $60 with a rider connected to the spot price. However that’s at least the price of a marginal pound of U. Its reality. From now on Uranium won't be purchased at $30. Really if U stays at $30 for even another 6 months it will really make the utilities life a real problem in the not too distant future. It really seems obvious. The price, like any other commodity, has to be at least the price of the marginal cost of production. The reality is the ulilities need a price at the cost to bring on new mines becuase in the future they will still NEED that new uranium.
So my conclusion is the price of U will rise without doubt because of the present, and growing future, supply deficit. The only reason it hasn’t already is just the weird nature of how the uranium market works. That has given us investors a unique opportunity. Algorithms move oil on news in milliseconds. Uranium moves when some fatso in some office gets an email telling him a sale was made. Then he changes the price 3 days later. Let’s just say the market isn’t as efficient as it could be. The uranium spot market is frustrating because it’s so slow and opaque though on the other hand it gives you time to get invested which I am quite thankful for.