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Why uranium prices are poised to rebound
Myra P. Saefong
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The outlook for the uranium market might have brightened in August after Japan restarted the nuclear reactor at the Sendai power plant.
Demand for uranium fell in the aftermath of the 2020 disaster at Japan’s Fukushima Daiichi reactor. Uranium investments, including shares of producers and exchange-traded funds, have been slow to recover. Now, analysts say, the first restart of a Japanese reactor since Sept. 2020 presages a revival for prices of the commodity and related investments.
How much, and how quickly, those investments rebound is a matter of debate. But many now believe a corner has been turned. “The story for uranium can be summed up as inevitable, if not imminent,” said Brien Lundin, publisher of the metals and natural-resource subscription publication Gold Newsletter, who called the long-term supply and demand outlook “exceptionally bullish.”
That could lead to a turnaround for shares of uranium producers and exchange-traded funds, such as Cameco Corp. CCJ, +1.34% and the Global X Uranium ETF URA, +1.75% , which took hits after the tragedy and have yet to fully recover.
Kyushu Electric Power Co. 9508, restarted a reactor at its Sendai nuclear power plant on Aug. 14—fuel loading has also been completed for a second reactor in preparation for its restart—marking the first Japanese nuclear unit to come back online under the strict safety standards adopted after March 2020, when the strongest recorded earthquake ever to hit Japan sent tsunamis into the Fukushima Daiichi power plant.
By Sept. 15, 2020, all of Japan’s nuclear facilities were completely shut down. Other countries also closed nuclear plants, including Germany and Switzerland.
The Japanese news is a “very positive sign for the global nuclear industry, including for the uranium market,” said Jonathan Hinze, executive vice president, international, at nuclear-fuel consultancy Ux Consulting Co.
Japan was the world’s third-largest nuclear power generator behind the U.S. and France before the disaster, with nuclear power generating roughly 30% of its electricity. With units restarting and additional ones moving through the restart approval process, Hinze said, “nuclear power is once again back in Japan.”
That means two important things for the uranium market: that the fuel already purchased by utilities will likely be used up, rather than dumped back into the market as some had feared, and there are now expectations of substantial long-term uranium demand in Japan.
Investments poised to rebound as demand increases
For the uranium market to get a boost, analysts say, a lot of dust still needs to settle. But the fact that Japan has decided to restart its nuclear plants may convince other countries to energize their own programs, according to Charles Perry, a former TXU Energy Corp. board member who retired in 2003.
Japan was respected for its “nuclear savvy”—a respect that carried through the country’s own disaster, Perry said. Japan’s handling of the disaster and recovery has “gone a long way toward rebuilding” that, he said, so “what the Japanese do with their nuclear power will influence most of the world.”
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That may not translate into an immediate benefit for the uranium market, however, because Japan is believed to have a substantial stockpile.
“ ‘Japan is swimming—some would say drowning—in uranium.’ ”
— Jim Ostroff, Platts Nuclear Publications
“Japan is swimming—some would say drowning—in uranium” said Jim Ostroff, senior editor of Platts Nuclear Publications.
Ostroff says only a few Japanese reactors are expected to come online soon, so the country’s demand will recover slowly as they move through current supplies.
Japanese utilities have about 120 million pounds of uranium stockpiled, Ostroff says market sources tell him—enough, he believes, to supply all of its pre-Fukushima needs for six years, assuming an average annual usage of about 20 million pounds across 54 reactors.
Kyushu Electric Power Co. has restarted a reactor at its Sendai nuclear power plant.
Not all of those reactors will be restarted in the wake of the Fukushima disaster, however. The World Nuclear Association estimates that about 43 reactors have the potential to be restarted.
Still, the stockpile is part of the reason spot uranium prices have stayed under $40 a pound despite the reactor restart, said Christopher Ecclestone, a mining strategist at investment bank and research firm Hallgarten & Co. The Japanese also likely grew their uranium supplies during the “closed” years because of existing contracts, he said.
Is a turnaround for uranium investments on tap?
Nuclear power’s uncertain future prompted a fall in weekly spot uranium prices from $62.50 a pound at the end of March 2020 to around $51.75 by the end of the year, according to UxC data. On Monday, it was at $37.75. (UxC uranium futures are traded on Globex, but liquidity is low.) November uranium US:UXX5 was quoted at $37.30 Wednesday.
While commodity prices, particularly oil CLV25, -53.95% , have fallen lately, uranium prices have stabilized. Shares of Cameco and the Global X Uranium ETF, however, have fallen along with the rest of the mining and energy sector, according to Jeb Handwerger, president of Mining Development Corp. and editor of GoldStockTrades.com,
“Sentiment [about the energy sector] is at a historic low,” he said in an interview. The ETF is down more than 30% this year, while Cameco shares are nearly 14% lower.
Weekly spot uranium prices in U.S. dollars per pound.
“The question of when the uranium market will turn depends upon when the utilities start to worry about locking up fuel supplies,” said Lundin. “They’ve been patient over the past few years, but I think they’re going to have to start moving over the next year.”
Lundin said China’s current and planned construction of nuclear power plants is a good indicator of future demand. Mainland China has 26 nuclear power reactors in operation and 25 under construction, with more planned, according to the World Nuclear Association.
Once uranium prices rise, Handwerger said, uranium miners will “likely outperform” and the Global X Uranium ETF could double in price in three to five years. Experts say concrete signs of increased demand could be seen this year.
“The market does seem to have some legs right now,” Hinze said. “We could see a gradual strengthening over the coming months.”
Coronavirus update: 1.39 million cases globally, 79,091 dead; Wuhan, China, reports zero deaths for first time since January
The Chinese city of Wuhan reported zero deaths Tuesday from the coronavirus that causes COVID-19 for the first time since January, raising hopes that China’s extraordinary containment measures are having an effect and could be reproduced elsewhere.
OUTLOOK FOR A RISE IN THE PRICE OF OIL PUSHES URANIUM UP
By Paul Hofmann Special to The New York Times
Nov. 26, 1976
VIENNA, Nov. 25—The prospect that the world will soon have to pay more for oil is pushing up the price of uranium and has caused a global, though covert, scramble to stockpile nuclear fuel, experts here say.
Officials of the International Atomic Energy Agency in Vienna point out that the world markets for oil and for uranium have become closely interrelated in the last few years and predict they will remain so in the near future. Natural uranium—before enrichment—now costs $42 a pound for immediate delivery, eight times more than in 1972. In the same period, the price for crude oil has quintupled.
The Organization of Petroleum Exporting Countries, which also has headquarters in Vienna, has been planning to reconsider the oil price structure at a conference in Qatar Dec.15. It is generally expected that the oil cartel will set new prices at least 10 percent higher than the present ones. Oil companies and governments around the world are buying up what crude oil they can get to take the edge—at least temporarily—off the looming price increase.
At the same time, governments and private utilities that are operating nuclear reactors and have to rely on imported fuel are known to be competing to build up uranium inventories. These efforts to stock up on uranium are not being advertised. The secrecy that shields military uses of atomic energy also envelops many activities of the civilian nuclear industry.
“There is a great deal of commercial confidentiality in uranium deals,” said James Cameron of the nuclear powers and reactors division ‘of the Vienna agency in an interview. “We ask for information and are not always told by the governments concerned.”
There are relatively few major uranium producers in the world. Even fewer of them sell to outsiders, and stocks in their hands—according to the scanty data available here—seem to be generally low. The most important uranium mines outside the Communist nations are in the United States, Canada, South Africa, France and Niger. Australia is likely to become an international supplier following a recommendation by an official body last month to authorize mining the continent’s rich deposits under strict environmental safeguards.
Red Bloc Status Unknown
The Soviet Union and its allies and China furnish almost no information on their uranium sources. It is believed that a sizable part of the Soviet Union’s uranium needs is filled by mines in Czechoslovakia. In the non‐Communist world, contracts to purchase uranium range “from a few hundred pounds to millions of pounds,” according to Maurice V, Hhansen, also an expert at the Vienna agency. The estimated global production of uranium in 1975 was about 25,000 metric tons.
Utilities with big nuclear power plants to feed are seeking long‐term contracts to secure uninterrupted uranium supplies at stable prices. They find that the rates for delivery in the 1980’s are much higher than those for immediately available fuel. The reason is that a “uranium crunch” is forecast for the 1980’s, when many more nuclear reactors will be on stream than there are now. Thus the current rate for 1982 delivery is $62 a pound of uranium.
Energy specialists here say price policies in the nuclear industry are also psychologically influenced by trends in the petroleum economy. “Have you heard of anything ever becoming cheaper?” an international official who didn’t want to be identified said. “Whenever the price of oil goes up, the price of uranium will jump almost automatically.”
Officials of the Vienna agency declare they are aware of allegations that pricefixing has been going on in the uranium market for some time but insist that they have no evidence of such conspiracies or of the existence of an OPEC‐like uranium cartel.
Buying (Going Long) Uranium Futures to Profit from a Rise in Uranium Prices
Binance Futures is now letting traders choose up to 125x leverage on their futures trades. How do you take advantage of this option, and what should you look out for? Find out in this blog.
Just a month after Binance Futures successfully launched, we’re upping the ante more than fivefold. We recently launched customized leverage, where Binance Futures users can select their preferred leverage when trading. And users can go as high as 125x leverage in this update!
During the past month, Binance Futures offered users 20x leverage . With the recent update, you can set the leverage as low as 1x or as high as 125x , with different corresponding margins and tiers depending on the amount of USDT you’ll trade. For further information about the mechanics for each leverage tier, please refer to the following guide .
With this new feature, there’s no better time to sign up for Binance Futures than right now! Make a Binance account now and get a 10% lifetime discount on fees!
Here are 5 things you need to know about this new major upgrade to Binance Futures.
1. Increase your trading position with 125x leverage.
One of the main benefits of trading on Binance Futures is that it is extremely capital-efficient. With the spot market, if you want to trade 1 BTC, you need to have thousands of USDT. But with Binance Futures, you can open a position with a fraction of the cost. And the higher the leverage is, the lower you need to spend on that position.
Let’s say that the current price of Bitcoin is 10,000 USDT (for ease of calculation/willing it into existence). You have 100 USDT, which by itself can only buy you just 0.01 BTC. But if you transfer your 100 USDT onto Binance Futures, you would be able to trade with up to 125x leverage and open a buy/long or sell/short position of as much as 1.25 BTC.
This way, you have a chance to get higher gains that come with having a 1.25 BTC position than if you only bought 0.01 BTC, while using up a smaller amount of crypto for the position you opened.
2. Here’s why 125x can be better than 20x.
Let’s say you had the 100 USDT last week, when leverage was just 20x, instead of this week. (1 BTC was still at 10,000 USDT.) In this scenario, the largest position you would have been able to open would be 0.2 BTC.
Now, let’s say that in both scenarios, you entered a buy/long position. Within an hour, BTC rose from 10,000 USDT to 11,000 USDT. Under the 20x leverage scenario, your 0.2 BTC long position would have netted you a 200 USDT gain , before trading fees (which at Binance Futures, is way lower than the competition). But under the 125x leverage scenario, with a 1.25 BTC position, your profits would go up to 1,250 USDT .
3. Friendly reminder: Be cautious when trading with leverage.
Remember: high reward comes with high risk. Bitcoin’s price can go up and down in a rapid manner, being a highly volatile asset. In the same way that leverage can multiply your gains, it can also compound your risks and potential losses when you open a buy/long position and the market goes down, or when you open a sell/short position and the market goes up.
How much risk are we talking about? There will be a certain price point where your position will be liquidated, and you lose the money you put into that position. Trading with higher leverage means that opening positions are less capital-intensive. For instance, a 10,000 USDT position would only require 80 USDT of initial margin. However, the low initial margin can be a double-edged sword as price volatility can easily exceed margin deposits. As such, traders must ensure sufficient balance in their wallets to avoid liquidation.
Read here for more information about liquidation.
4. No matter your leverage preference, Binance Futures has your back.
As futures trading comes with risk, Binance Futures’ main priority is to protect our users and mitigate potential losses. Binance Futures offers stop-loss orders, take-profit-limit orders and other options to close out of your position before reaching the point of liquidation, even when you’re not watching the markets.
Binance Futures aims to bring sustainable crypto-based futures trading to the industry so that users feel safe even when dealing with potentially high risks. Binance Futures leverage trading is powered by a sophisticated risk engine and liquidation model that delivers fast results to users, including many safety features that serve to protect you as much as possible.
5. We delivered customized leverages with zero downtime.
The customized leverage implementation has been delivered with zero downtime impact to the market, which is a huge milestone for the Binance team. We aspire to deliver upgrades and enhancements to the futures trading platform without interrupting trading operations.
And with all the upgrades it has implemented over the past month, it will be a delight to see what happens when the platform continues its momentum.
Risk warning: Buying, selling, holding and partaking in futures trading of cryptocurrencies are activities that are subject to high market risk. The volatile and unpredictable nature of the price of cryptocurrencies may result in significant loss. Binance is not responsible for any loss that you may incur from price fluctuations when you buy, sell, hold and leverage cryptocurrencies.
How to Invest for Rising Interest Rates
Although many investors and analysts focus on interest rates being low, rising interest rates change the landscape of the marketplace for businesses and individual investors. Here’s how investors can profit from rising interest rates.
- Investing in rising interest rates can be successfully done by investing in companies that will do well with higher rates—such as brokers, tech and healthcare stocks, and companies that have a large cash balance.
- Investors can also capitalize on the prospect of higher rates by buying real estate and selling off unneeded assets.
- Short-term and floating rate bonds are also good investments during rising rates as they reduce portfolio volatility.
1. Invest in Brokerage Firms
Brokerage firms earn money from the interest earned on cash balances held in client accounts. Naturally, they earn more interest when rates are higher. A review of the 2003-2004 period, when the federal funds rate rose from 1.25% to 2.25%, shows major online brokers such as E*Trade and Charles Schwab enjoyed a 38% increase in interest income and a resulting 10% improvement in operating profit margins.
2. Invest in Cash-Rich Companies
Cash-rich companies will also benefit from rising rates, earning more on their cash reserves. Investors can look for companies with low debt-to-equity (D/E) ratios or companies with large percentages of book value in the form of cash.
3. Lock in Low Rates
Individuals with adjustable-rate mortgages (ARMs), or companies with adjustable-rate financing of any kind, would be well-advised to refinance with fixed-rate financing, locking in the lowest possible interest rates for the long term.
4. Buy With Financing
Individuals or businesses planning major purchases or capital expenditures should consider buying now while they still have the ability to lock in low long-term rates. Purchases made before interest rates begin to significantly rise can result in substantial savings in financing charges and overall long-term costs.
5. Invest in Tech, Healthcare
Most companies in the technology and healthcare sectors hold on to greater amounts of profits as retained earnings to reinvest in growth, rather than paying them out in the form of dividends. Past history shows that such a stance usually leads to increased revenues in a rising rate environment. In the past 13 periods of rising interest rates—over the past half-century—the healthcare and technology sectors experienced average gains of 13% to 20% during the first year following an interest rate increase. In comparison, the overall average gains for the S&P 500 Index were only between 6% and 7%.
6. Embrace Short-Term or Floating Rate Bonds
Bond investors can decrease portfolio volatility during rising-rate environments by moving to bonds with shorter terms to maturity or by purchasing bonds with coupon rates that float in concert with the market rate.
7. Invest in Payroll Processing Companies
Payroll processors, such as Paychex and Automatic Data Processing, customarily maintain large cash balances for customers in the periods between paychecks, when the money is distributed as payroll. These firms should see improved interest revenues when interest rates rise.
8. Sell Assets
Individuals or businesses with unneeded property or other assets may be able to profit from selling such assets before rates begin to rise. Buyers are likely looking to buy now when they can still lock in low, long-term rates, so they may be willing to pay premiums to acquire needed assets before rates begin going up.
9. Lock in Long-Term Supply Contracts
Rising rates generally mean rising prices as well. Businesses that can lock in long-term contracts with suppliers may be able to enjoy better margins by avoiding increased prices for as long as possible.
10. Buy or Invest in Real Estate
Real estate prices tend to rise with, and often even outpace, interest rates. Buying real estate or investing in real estate investment trusts (REITs) is another way to realize profits from a rising rate environment.
Rising interest rates may sound like a bad thing for those who need to take out a loan or buy something on credit, but investors can profit by planning ahead and purchasing the right types of investments.
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