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Hedge funds continue to bet on uranium as supply shortage drives prices higher

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In what has become an ongoing trend over the past few years, global hedge funds are continuing to bet on uranium prices rising due to supply shortages.

The concerted push was recognised in 2021 when hedge funds backed a 37% increase in uranium prices as they gambled on growing demand as its “clean energy” reputation gained further international acceptance.

According to reports from numerous financial news sources, the practice continues to grow with hedge funds now acquiring raw uranium as its price surges to 16-year highs.

Stockpiling raw uranium

Reports out of the UK claim that more than 50 hedge funds have invested in uranium in recent months.

Numerous reports also suggest hedge funds are physically storing raw “yellowcake” uranium at specialist facilities such as those operated by US processing firm ConverDyn.

ConverDyn is a general partnership between American multinational firms General Atomics and Honeywell that provides uranium hexafluoride conversion and related services to utilities operating nuclear power plants in North America, Europe and Asia.

In early 2023, ConverDyn received a $21 million award for uranium conversion services from the US Department of Energy under its program to create a domestic uranium reserve to boost energy security.

Multiple funds involved

According to the reports, leading funds playing a major role in the acquisition of yellowcake include New York-headquartered Anchorage Capital, London-listed Yellow Cake and the Toronto-listed Sprott Physical Uranium Trust.

“What you’re seeing with these investor types is that they’re just buying and holding,” ConverDyn vice president for business development Nikko Collida said recently in an interview.

“We’ve had some accounts that are accumulating more pounds than you would normally have seen in the past..”

“With nuclear, it’s always in a state where supply is reacting slowly to demand changes.”

“We’re at a higher [level] of under-supply at the moment.”

According to the recent report “Uranium: How Much Risk and How Much Reward?” by London-based advisory firm Ocean Wall, the presence of financial speculators in the uranium market is increasing and impacting supplies available to utilities.

It says that an estimated 40-50 hedge funds now have licenses to buy and hold physical uranium.

Surging demand

With governments and the public gradually changing their anti-nuclear views, Ocean Wall says a global shift towards nuclear power for carbon emission reduction has been evident, with 61 new reactors under construction and more planned.

“Bears point to the fact that utilities are not panicking and trying to secure as much uranium today as possible because there is an abundance of floating or mobile inventory,” Ocean Wall reported.

The London firm says that several estimates have total global uranium inventories at around 1 billion pounds, down from their historical levels of 2 billion pounds.

“One billion pounds might seem like a very large figure, enough to cover many years of global consumption, but once we start to categorise the inventory it becomes clearer that this is not the correct interpretation of these figures.”

Tightening supply

According to Ocean Wall, utilities previously looking to buy short-term inventories from a flooded spot market are now unable to do so.

“Findings from the UxC 2022 Global Nuclear Fuel Inventories report concluded that the trend of inventory reduction that began in 2017 has continued over the last few years and has been accelerated by several factors—primarily the emergence of financial entities such as the Sprott Physical Uranium Trust and Yellow Cake, who now own around 85 million pounds between them, and neither party are sellers, only buyers.”

“This buying spree resulted in financial entity inventories increasing 140% between 2020-22 while US, EU, Japanese and uranium trader inventories all declined significantly during the same period.”

“While there is uranium inventory globally, this inventory cannot be viewed as ‘mobile’ or ‘excess’ inventory that can be used to meet incremental uranium needs,” Ocean Wall reported.

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