Uranium is in the Canadian spotlight once again thanks to significant financial investor interest in the mineral. Uranium market participants say the nascent phenomenon has its benefits, but speculation abounds as to how the price surge will affect the utilities amid an excess of demand over supply.
Uranium prices have been extremely volatile in September—rising to above US$50 a pound by mid-month—up about 40 percent, which is more than all other major commodities, according to Bloomberg. Prices fell to around US$45 in late September, which is still up more than 30 percent in the month.
This is coming on the heels of very stable prices over the last five years, after a gradual decline over the five years prior. Prices peaked at US$136 a pound in 2007.
As of Sept. 28, the Sprott Physical Uranium Trust, a Canada-based exchange-traded fund, is up about 35 percent since its July 19 inception. It has amassed a uranium stockpile roughly 16 percent of the annual consumption of the world’s reactors, Bloomberg reported.
The fund gives investors a way to directly invest in uranium without having to take physical possession of the mineral, similar to gold funds.
The demand for uranium seems durable in a way that feels different this time, said Grant Isaac, senior vice president and chief financial officer of Saskatchewan-based uranium-mining company Cameco, during a Sept. 20 conference call.
He views Sprott’s buying of the mineral as unequivocally beneficial to the uranium market, noting that it’s being done “in the most transparent and verifiable way” he’s ever seen, with the prices paid being available to the public.
Isaac said he’s happy that Sprott has taken over from Cameco as the biggest uranium buyer.
Uranium, in fact, does not trade on the open market like other commodities do. Rather, buyers and sellers negotiate longer-term contracts for the mineral privately. Thus it’s been said that the uranium market lacks price transparency.
“One of the things that a lot of investors are expecting from the trust is it playing a greater role in that price discovery process,” said John Ciampaglia, CEO of Sprott Asset Management, during a Sept. 14 webcast. “And that’s exactly what the trust has done so far.”
Watching and Waiting
The utilities that need the mineral to power nuclear reactors are reportedly not actively buying or selling the product despite all the noise in the uranium markets. Economist Peter St. Onge says they’re not known for their financial acumen and could be “deer in the headlights.”
“This hasn’t happened [for] a long time—uranium has been asleep for at least five years,” he told The Epoch Times. “One of the concerns is that these guys [the utilities] get caught flat-footed,” he added.
However, Per Jander, technical adviser to the Sprott uranium fund, said during the webcast that “I’m not worried that any utility is going to run out of material to run the reactors.” He said the utilities are probably watching and waiting to see if the rise in prices is sustainable, as they have some inventory.
The Epoch Times contacted Ontario Power Generation for comment but did not get a response.
