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16/09/2021

Asian indices are now in the red due to the China Evergrande problems.

Expectations of the crisis in the Chinese construction sector put pressure on metal prices. Oil still maintains the positions it acquired due to problems with the resumption of production in the Gulf of Mexico, as well as a shortage of energy resources, both in Europe and in China. During the day, oil could change its dynamics and gas prices in Europe could start to adjust.

The oil and gas price situation remains critical. The cost of gas futures at the Dutch hub has reached almost $ 980 per 1 000 cubic meters. If the winter is not cold, current reserves in Europe will remain at a comfortable level, but a repeat of last year’s weather scenario will spell an energy crisis. The situation is aggravated by a prolonged period of light winds in the North Sea, which affects the volume of electricity production.

During the day, the price of uranium oxide (known in the market as “yellow cake”) rose another 11% to close to $ 50 a pound for the first time in 9 years. Shares in the atomic industry also accelerated the rise.

In terms of demand volume, nuclear power plants reached an all-time high in the early 2000s, and since then demand has remained at a relatively stable level. But the offer is cyclical. It peaks and declines after the completion of major investment programs every 20 to 30 years.

The most important point: the production of new uranium does not meet the needs of nuclear power plants, the gap between supply and demand has narrowed since 2015 and is now at its lowest level in 10 years.

This is because nuclear power plants have old military arsenals and can also use secondary nuclear fuel (fission products of plutonium and uranium).

The current global shortage is mainly caused by China, which has built 18 reactors in addition to the existing  51, 200 reactors are under construction. Russia plans to double its capacity. India and the United States also have big plans for the development of nuclear power plants.

More than 50% of this raw material is found in Australia, the former post-Soviet countries (mainly Central Asia), Canada and Africa. The capacities in the peripheral countries are mainly distributed between companies from Canada, China, the United States and Russia. Therefore, it can be expected that the resuscitation of production could take several years.

The price of uranium has crossed $ 70 on several occasions and even climbed to $ 140 a pound in 2008 and 2011. Such a steep rise was mainly due to the actions of speculators: funds bought uranium, playing on the gap between supply and demand. Today we are seeing a repeat of this scenario.

Sprott Physical Uranium Trust, created this summer specifically to invest in uranium fuel, resumed purchasing yellow cake after a short break: the local regulator gave the fund the green light to implement its purchase and maintenance strategy. This has led to a new round of price increases.

Sprott Physical Uranium Trust is not alone in this area. In total, American and European funds hold around 20% of the annual volume of uranium consumption in their portfolios, and they can increase their positions as long as the price remains below the fundamental level.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

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