NYSEAM:UEC - Post by User
Post by
mangoeon Jun 08, 2024 12:44pm
138 Views
Post# 36079284
ð€Why this week's deep pullback for #Uranium #stocks and â
ð€Why this week's deep pullback for #Uranium #stocks and â 
Why this week's deep pullback for #Uranium #stocks and Spot #U3O8?
sums it up this way:
"Despite an array of bullish fundamentals, including buyer demand, continued market bifurcation and tight supply, wider energy and mining market sell-offs engulfed the uranium spot market this week."
In other words, the Uranium sector experienced collateral damage from a major selloff in the #mining and #energy sectors as traders, fund managers, institutional & retail investors headed to the exits on sinking metals prices and a falling demand outlook for energy & resources in the latest macro economic data.
Over the past while we've seen major pumping of gold, silver and copper stocks which has been drawing traders & investors away from uranium stocks as the next commodities hyped to go on a bull run... but, as these charts show, gold & silver & copper prices rolled over this week and began to dive, so there was panic selling in the mining space which came to a head on Friday after release of the latest US jobs report.
Investment portfolios in both mining and energy include Uranium stocks, funds & ETF's given that Uranium is somewhat unique in its crossover inclusion as both an energy fuel
and mined metal. So.. when both mining and energy sectors are experiencing a dowturn
it becomes a double-whammy for the Uranium sector as generalist investors dump their mining and energy portfolios into the market as they head for the exits.
As point out... day after day we see more and more U demand as the world embraces #Nuclear like never before, yet on new U supply coming to the market we hear only crickets.
At the same time, more and more nations are pivoting away from using Russian-origin Uranium, which is putting more and more pressure on western enrichment, conversion and mined U3O8 to provide the needed replacement supply.
Regardless of waivers, the US ban on Russian enriched Uranium will completely end the use of Russian enrichment Uranium starting in 2028. The western Uranium market, where world prices are set, will be squeezed to make up for that 25% of lost US reactor fuel supplies. The fundamentals in support of western Uranium miners are the best they've been in over 5 decades, and nothing happened this past week to change that!
So, what about the drop in the Spot Uranium price?
Long-time followers of the Uranium space know by experience that every time there has been a major pullback in Uranium stocks over the past few years it has usually been accompanied by a drop in the Spot U3O8 price.
The Sprott Physical Uranium Trust, #SPUT, is the most active buyer in the Spot market. Other participants in the Spot market tend to take their cues from what is happening with SPUT's discount to NAV and its ability to raise cash for making more Spot purchases.
When SPUT's share price is sinking in a major pullback that renders its cash-raising ATM inoperable
then others in the market, both buyers and sellers, adjust their expectations accordingly. Traders who have material they need to sell to bring in essential cash flow will drop their Asks in hopes of finding a buyer other than SPUT. Nuclear fuel buyers will then pull their orders or drop their bids to see how low those motivated Spot Uranium traders are willing to go.
No buyer wants to overpay for a commodity when there's potential to get it at a deep discount price, and nuclear fuel buyers, traders and producers that have buy orders to fill are no exception.
This is especially true for Nuclear utility fuel buyers that also have long term supply contracts with pricing that is tied to the Spot price. The lower the Spot price goes, the less they will have to pay when they take delivery of those contract shipments in the months ahead. Further, they are in negotiations with suppliers to secure new supply contracts, so the lower Spot goes then the better terms they will be able to negotiate with producers.
There is no desire on the part of fuel buyers to bid up the price they pay for small discretionary Spot market purchases! Instead, they will sit back and let the motivated sellers come to them... which leads to the drop in the Spot price we saw this week.
The Spot Uranium market is not a true commodity market. There is no public trading of U3O8. The Spot price is simply a reference price reported by Nuclear fuel brokers who are engaged in trying to match up buyers and sellers in private transactions and off-market deals. There is so little material on offer that there can be large price swings as macro and sector-specific sentiment and trends influence the negotiations between buyers and sellers. There are also Uranium traders who have signed long-term offtake contracts with a small number of producers. They take small deliveries on a regular basis that they need to sell into the Spot market to provide cash flow to keep their business afloat. Every buyer in the tiny Spot market knows this and tries to use that to achieve the pricing they desire on their orders. It's a small illiquid market.
Price volatility is the result.
That's the way I see it based on 14 years of experience with the Uranium market.
U may see things differently. That's what makes a market.
If U are looking to initiate new positions in Uranium stocks or add to your existing positions then U have been handed a gift of an opportunity to buy at deep discount prices
stemming from a pullback unrelated to the underlying 'best ever' supply/demand fundamentals for mined U3O8 that's in a long-term bull market with many years yet to run.
Good luck with your own research, learning and investments!
"Nuclear Fuel Market: Price Slumps on Broader Trends, Despite Scarcity of Supply" https://energyintel.com/0000018f-f3a3-d824-a7df-f3bfe6d90000…
