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Finance Investment - Exploiting Uranium Price Market Inefficiencies
| Title : "Exploiting Uranium Price Market Inefficiencies".Finance Investment,Investment,Business Because of rapid developments in the uranium sector, over the past three years, the market place continues attempting to digest all the news and adjust accordingly. In a June 2003 utility PowerPoint we recently reviewed, it became evident to us that U.S. utilities were later ambushed by unforeseen developments then entering the markets. According to the industry presentation made by a well-known spokesman of a nuclear utility, he explained to his audience, four years ago, “It is difficult to see how very many companies could afford to invest in new production when there is such a glut on the supply side.” He added on one slide, “Only those with substantial market share, long-term contracts and low production costs can afford to invest in new production in such a market.” He also pointed out, during his lecture, the Russian HEU feed sales ‘will overhang the market and serve to moderate price.’ Times have changed. We bring this up not to torture this man’s faulty prescience, but to demonstrate how greatly the uranium market has undergone massive upheaval in such a short time. The market is still struggling to attain realistic efficiency and transparency. For nearly four decades the civilian nuclear fuel market had been a closed society. According to one interview we conducted a year ago, we were told you could fit all the market participants into a Starbucks®. For more than a decade and through 2003, it was a buyer’s market. Buyers dictated prices. Uranium miners either quietly whined among themselves or took it on the chin and humbly sold their uranium for whatever cash the buyer would pay. Over the past two years, sellers have begun dictating floor prices with only a passing concept of a ceiling price. Just as buyers were relentless prior to 2006, sellers hold all the cards for the next little while. Using TradeTech’s long-term contract price of US$85/pound U3O8 equivalent, new entries to the uranium market have a comfortable spread between operating costs and the floor price for their uranium sales. Still, there remain numerous inefficiencies in the spot uranium pricing market. Probably less than 200 people worldwide have a grasp of what is really going on within this uranium markets; some might consider this estimate quite generous. Of those, probably far less than fifty have extremely reliable information. None of these individuals write uranium mining stock newsletters. In order to provide uranium mining stock investors, uranium futures traders and others with the tools to capitalize upon these market inefficiencies ‘for their own protection,’ we compiled a list of valuable news sources from which to draw vital industry data. We also provided some commentary about each to help protect yourself against upcoming price volatility in this marketplace. In our January forecast, we expected some price volatility in 2007. This remains as true today as it was when we announced it four months ago, especially after we re-read those last four paragraphs we wrote in that commentary. (from stockinterview.com/News/01102007/Future-Uranium-Price-Swings.html ) Five valuable news services provide a substantial amount of ‘breaking news’ information and/or decision-making insights about uranium pricing. Each have established their own niche in the uranium market and have developed a dedicated following. The ‘trade papers’ are where many of the mainstream media visit for sound bites and new developments in order to write those articles. At least four of these news services are widely read by the serious players in the market. These include utilities, fuel managers, fuel brokers, trading companies, governments and market traders (in either physical uranium or mining stocks or both). With the advent of NYMEX futures trading, the uranium market is proceeding through another paradigm shift. We expect Wall Street players to stampede into this sector in increasing numbers as evidenced by reports from the recent Raymond James (NYSE: RJF) Uranium Conference in New York City.( from www.stockinterview.com/News/05142007/Wall-Street-Uranium.html The serious reporting services include: Platts Nuclear Fuel, Nukem Market Report, Fresh FUEL (Washington Nuclear Corporation), Nuclear Market Review (TradeTech) and Ux Weekly (Ux Consulting). We have come across glaring inefficiencies in the price-reporting space. For example, there are only two services reporting the month-end price of uranium (more specifically the U3O8 equivalent): Nukem Market Report and TradeTech’s Nuclear Market Review. Another question remains unanswered: Why is there a US$35/pound spread between the long-term uranium price and the weekly spot price? And for that matter, at which levels are the floor prices near-term uranium producers, such as Energy Metals (NYSE ARCA: EMU), have signed with utilities? Are these at US$85/pound? Or are the floors at higher prices? Lower prices? How high is the ceiling price? We did discover one interesting discrepancy. For momentum traders and those hoping to exploit the market price inefficiency: TradeTech reports its uranium price indicator after market on Friday while Ux Consulting does not report its price indicator until late Monday. Rarely are these price indicators much different. After all, both talk to mostly the same nuclear buyers and brokers to arrive at their price indicators. However, U.S. stock options traders, utilizing a company’s put and call options series, such as those offered by Cameco Corp (NYSE: CCJ) and Uranerz Energy (AMEX: URZ), could possibly benefit by knowing the uranium price indicator before trading commences Monday morning, especially after a spot uranium price spike. Certainly this inefficiency will someday be remedied, but those traders hoping to exploit this unfortunate and archaic market mechanism could potentially reap trading profits. Summary of Uranium News Services Each of these news services has varying degrees of ‘connection’ and credibility within the uranium space. All five have their pulse on the uranium price. Nukem is a subsidiary of a former uranium mining company, which now specializes in nuclear engineering services, including decommissioning and nuclear waste management. Nukem publishes insightful articles about the nuclear sector in the company’s monthly Nukem Market Report. Nukem also publishes the month-end uranium price indicator. One can visit their website to find out about their services: from www.nukeminc.com/. A more intensive reporting of the weekly price range comes from a Nukem spin off: Energy Intelligence. This service has covered the energy markets for decades and is widely respected in all sectors they cover. from energyintel.com/ As with all Platts publications, Platts Nuclear Fuel is owned by The McGraw-Hill Companies (NYSE: MHP). The publication is published every two weeks. Platts publishes a uranium price range, provides penetrating reportage of the nuclear fuel cycle sector, and reports on the uranium price indicators issued by TradeTech and Ux Consulting. One can contact Platts by email for additional information or apply for a free trial at support@platts.com or by telephone: 212-904-3070. FreshFUEL is published by Washington Nuclear Corporation. Unlike NYMEX uranium swaps, which are financial-based, this weekly publication reports on physical uranium actually traded during the week. In their May 11th issue, we reviewed a snapshot of the results for New York Nuclear’s Wednesday two-hour online trading session through the UraniumOnLine electronic trading system. FreshFUEL is published 50 times per year and subscription information can be obtained by contacting Nancy Passarelli through her email address of np@nynco.com or by telephone at 212-682-5070. In the past, many had recognized Ux Consulting as one of the more widely followed consulting services in the uranium space. This company reports a spot price indicator to subscribers sometime on Monday afternoon and then publicly releases the same data late Tuesday or Wednesday. To our knowledge, Ux Consulting has never issued a month-end U3O8 spot price unless the weekly spot price coincides with the last day of the month. UxConsulting has been in business for about twenty years. The website address is from www.uxc.com/ NUEXCO/TradeTech has been publishing the weekly spot uranium price continuously for nearly forty years. Through the company’s weekly magazine Nuclear Market Review, TradeTech publishes a weekly spot price indicator before midnight eastern time on Friday. The company also publishes an end-of-month spot price indicator – even on New Year’s Eve (December 31st). Subscribers receive weekly reports and monthly reports on an annual subscription. www.uranium.info Until recently, most subscribers for these publications were comprised of utilities and mining companies. After NYMEX announced it would trade swaps, traders began purchasing annual subscriptions for several of these services. Those wishing to remain on top of the news or ahead of the news should contact each company and find out about their publication offerings. At a time when we believe price volatility could instantly enter this market, it might pay to protect oneself by relying on professionals rather than the hearsay of amateurs. We hope this helps level the playing field for many. COPYRIGHT© 2007 by StockInterview, Inc. ALL RIGHTS RESERVED. James Finch contributes to StockInterview.com and other publications. His focus on the uranium mining and nuclear fuel sector resulted in the widely popular “Investing in the Great Uranium Bull Market,” which is now available on from www.stockinterview.com and on from www.amazon.com |
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